Why the SVB Shock Still Matters — Practical Treasury Lessons for Startups and VCs
The collapse of SVB was a wake-up call for the tech and startup ecosystem. Beyond headlines, it exposed structural vulnerabilities that any company with concentrated deposits or a single banking relationship can learn from.
Understanding those lessons helps founders, CFOs, and investors protect payroll, preserve runway, and reduce operational risk.
What went wrong — in plain terms
SVB’s challenges were driven by a mix of concentrated customer deposits, a bond portfolio sensitive to rising interest rates, and a rapid loss of confidence that led to large, simultaneous withdrawals.
That combination created a classic liquidity mismatch: long-term assets funded by short-term deposits.
When depositors moved quickly, the bank could not convert assets to cash fast enough without realizing losses.
Why it matters to your company
Startups and scaling companies often keep sizable balances at a single bank for convenience or due to relationship history. That creates two key risks:
– Deposit concentration risk: balances above insurance limits can become inaccessible during a crisis.
– Operational fragility: payroll, vendor payments, and capital calls can be disrupted if a primary bank encounters trouble.
Practical steps to harden your treasury
– Diversify banking relationships: spread operating cash across multiple FDIC-insured institutions or use multiple custodians for corporate cash.
Multiple login hassles are worth the safety trade-off.
– Respect deposit insurance limits: keep an eye on insured vs.
uninsured exposure and use sweep accounts or distributed accounts to stay within coverage where possible.
– Use short-term, liquid investments: money market funds, Treasury funds, or ultra-short bond funds can provide yield while preserving liquidity. Understand counterparty and credit risks before moving large balances.
– Establish backup payroll plans: set a secondary bank account and test payroll processes quarterly so staff can be paid even if the primary bank is unavailable.
– Secure committed lines of credit: a prearranged revolver or standby credit facility offers a liquidity buffer during stressed market conditions.
– Run stress tests and playbooks: model scenarios where large percentages of deposits are withdrawn and map action steps — who calls whom, which transfers are made, and how to communicate with stakeholders.
– Maintain transparent communication: keep investors and board members informed about treasury practices and contingency plans so expectations are aligned during volatility.
For finance teams — operational best practices
– Implement automated sweeps to manage intraday balances.
– Reconcile accounts daily and flag large, unusual flows.
– Maintain cash flow forecasting that looks beyond 12 months and accounts for downside revenue scenarios.
For investors and boards
– Ask portfolio companies about deposit concentration, backup banking relationships, and runway under stressed conditions.
– Encourage standardized treasury policies across portfolio companies to reduce systemic exposure.
Regulatory and market takeaways
The episode led to renewed focus on supervision of midsize banks, liquidity requirements, and the role of emergency liquidity programs.
Whether through regulatory changes or market discipline, the broader message is clear: liquidity management and diversification matter as much as product-market fit and growth metrics.
Next steps for any founder or CFO
Audit your cash positions today, set thresholds for insured balances, and create a simple contingency playbook. Small operational changes now can prevent large disruptions later and protect the team and customers when markets are turbulent.