Let's assume most companies don't generally have drooling morons for CFOs because, well, they don't. The majority of unneeded funds are invested somewhere, most likely a managed fund. So the amount of cash sitting at SVB earning zero percent interest is relatively small. But when you have 30 people making $120/yr, and payroll is due this week ($300k), and your $1m/month AWS/GCP bill is also due this week (skip the rent of the office since everyone's working remote); the SVB account will have $1.3 million in it to pay upcoming obligations.
Laddered CD’s, money markets, treasuries and other semi-liquid fixed income investments are probably better than the S&P500. Most boards (and shareholders) would frown on investing funds in the market. The value is supposed to be in the company, not the stock market.
It’s a good idea to collateralize (leverage) the funds following a raise for a line of credit with one or even two banks to have short-term cash options. The longer you build a trust relationship with a bank VP and use a line of credit responsibly, the better position you’ll be in when it’s crunch time or there is a big opportunity to go after with big short term cash requirements that can’t come from selling equity.
I’ve seen too many product-oriented startups try to raise bridge rounds because they are cash poor when they should have secured a banking relationship when they had funds available.
Some startups just moved excess funds into a money market account at SVB (managed by e.g. BlackRock)..
I'm not sure who is ultimately custodial of that money, and whether it's at risk today. My instinct is that it's at BlackRock, any idea if that's true?
