From using multiple banks to managing VC relationships, these are the 5 lessons...
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From using multiple banks to managing VC relationships, these are the 5 lessons every founder should have learned from the Silicon Valley Bank nightmare
The Silicon Valley Bank crisis has deescalated and depositors will not lose their money.
Now is the time for founders to change things to be better prepared for next time.
Here are the 5 top lessons every founder should have learned.
With the most immediate crises from the Silicon Valley Bank run averted in as elegant a way as possible, founders can wipe the sweat from their brow and focus on what they learned that will protect them in the future.
To recap: On Friday, the bank that famously served the tech startup community with loans and other banking services experienced an honest-to-goodness, It's-a-Wonderful-Life-esq bank run, and was taken over by the FDIC. Thousands of startups lost access to all of their money over the weekend, and many of their VC firm investors — who also used the bank — were in a similar boat. The weekend was a wild ride of analysis, CAPS LOCK PANIC TWEETING and organizing and lobbying, largely by the venture capital community aimed at bank regulators asking for help.
Regulators listened and opted to ensure that every penny that was on deposit in accounts was preserved for the bank's customers, even though most accounts were in excess of the $250,000 FDIC insurance limit.
The FDIC will cover the expense, should it have to, by increasing fees from banks for the FDIC insurance program, it said. (Fees from banks already fund the program) The agency is also searching for a buyer of the bank and short of that it will auction off assets to cover such costs. Stockholders of the bank are getting no help if a sale doesn't materialize, and no tax dollars are being used.
But every founder who experienced the bank failure, or witnessed it, should be using this life-flashing-before-our-eyes moment to look around and make changes. Here's the top lessons that every founder should have learned:
1. Use multiple banks to store cash if your balance exceeds $250,000, the limit of the FDIC depositor insurance. If something happens to one bank, such as a bank run, your company won't face ruin. There are a multitude of options to help manage this, such as Certificate of Deposit Account Registry Service (CDARS).
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