This is a very weird blame shift. At 250k/account insured suddenly it's a CEOs fiduciary incompetence that a seed round isn't distributed amongst 16 banks?
> suddenly it's a CEOs fiduciary incompetence that a seed round isn't distributed amongst 16 banks
Yes. There's no "suddenly" to it - you're describing well-established fiduciary responsibilities. A CEO's responsibility is to delegate those tasks to someone like a CFO, who _absolutely should_ incorporate a strategy that balances liquidity with stability. The CFO also has a responsibility to see just what, exactly, a bank is doing with their deposits and make a determination about the associated risk. And yes, it is very normal to park money in various accounts and instruments as part of that strategy.
It is deeply distressing that half the comments here and abroad think this is some absurd, unattainable standard instead of the operative norm for the other 90% of the economy that doesn't get treated like a miracle baby for simply existing. You're not running a lemonade stand, and witnessing self-anointed "innovators" screech for a bailout because they somehow accrued millions of dollars in investments without ever learning about private deposit insurance or Cash Sweep or T-bills goes a long way to explaining why the majority of these goofs fashioned their Twitter bios into graveyards for failed ventures.
Sub-20 person startup CEOs didn't cause this problem. Saying "this is YOUR fault, person who just got their first seed round" seems to gloss over the large(r) issues.
Anybody, including corporations and partnerships, can safely park excess cash at treasurydirect.gov. Buy short term treasuries and time the redemptions to coincide with next month's payrolls. The shortest bills are 4 weeks and they're paying like 4% right now.
I honestly don't understand why more people don't do it.
More generally the approach of using a cash sweep account in conjunction with t-bills held with a custodian bank seems like pretty sane advice. I don't think I'd emphasize "one bank," but otherwise, sure.
Your job is to understand and mitigate financial risk as is required by law.
And in this case there are many options for managing this risk other than splitting it up manually into multiple bank accounts. Speaking with a financial advisor would help with this.
CEOs who should have known better are not victims.
That's not your only option and this is nothing new. Even I - arguably a very small business owner - spread my risk. Just in case...
You pay for AWS because you don’t feel like managing hardware, why just assume you can manage 10s of millions of dollars?
Should they buy the T-Bills and hold the actual certificates under their mattress?
I don't think that's the case, though I may be wrong and would appreciate correction if so. Anyone who held T-Bills at SVB as a broker should have been able to transfer them to another broker at no loss (but at a small delay), and the remaining $250k in their checking account should have been available within one business day.
Especially a regional bank like SVB that fought hard against regulation, caters specifically to herd-thinking VCs and startups, offered 4.5% APY, and went all in on mortgage backed securities shortly before the Fed hiked rates way up.