Forgive the naive question, but why did so many companies put all their cash in one account instead of spreading it between two or more independent banks?
Because corporate financial education isn't part of the YC curriculum and most small companies don't have CFOs.
Large companies and smart individuals keep cash reserves in pass-thru depository products like CDARS which do exactly what you describe. You have a virtual account at Bank A that shows your balance, but the actual money is stored across hundreds or thousands of other banks across the US - each holding less than the FDIC insurance maximum.
Apparently SVB gave loans to startups with a condition that companies use SVB as an exclusive banking partner according to a billionaire on Twitter (unfortunately I’ve lost the tweet so can’t link)
It also sounded unmanageable the first time I heard the idea of consistently replicating databases across clusters in multiple availability zones, but ultimately the vast majority of tech companies nonetheless decide it's worth going through all that trouble to avoid existential risk in the event of a SPOF.
I'm curious about the calculus that makes this tradeoff non-worthwhile when it comes to squirreling away an emergency payroll fund in a backup bank. What about that is unmanageable?
Some might say that this is another reason we need a public ledger where we could speak exactly about the facts rather than speculate on bits of information leaked by people with conflicts of interest.
