Silicon Valley Bank has collapsed, after rapid growth, heavily concentrated uninsured deposits, losses on long-duration securities and a run of extraordinary speed.
The speed is the part worth sitting with. Deposits left through an app, in an afternoon, coordinated by people talking to each other in group chats. A bank run used to require a queue.
The business thought
For startups, bank choice is part of enterprise risk rather than an administrative detail settled once at incorporation and never revisited.
Fundraising success creates concentration risk of its own. A company that has just closed a round has more cash than it has ever had, sitting in one institution, in an account structure chosen when the balance was a fraction of the size.
The practical watch
Maintain a treasury policy. Insured operating accounts, diversified counterparties, short-duration cash management, payment access that has actually been tested, and a clear payroll contingency.
Review banking covenants and sweep arrangements rather than only the yield. The yield is what gets compared between providers. The covenants are what determine what happens on a bad week.
Related reading
- More capital, fewer founders: the real state of play for young entrepreneurs across EMEA, APAC and the Americas
- The post-SVB review sharpened the lesson: growth can outrun controls
- The Bank of England made its first cut of the cycle, but money stayed expensive
Source: contemporaneous reporting and regulatory statements, March 2023.