4 ms·

Remove the single point of failure in having one bank. Put the money not needed for day-to-day operations into short-term liquid government-based financial inst

Remove the single point of failure in having one bank. Put the money not needed for day-to-day operations into short-term liquid government-based financial instruments like t-bills. If you still think the risk is too high, pay the premium for CDARs or insurance. It is not about removing all risks. It is about making it acceptable. If your primary bank fails, you can manage it like any other strategic business risk.

wrs 4y ago
The risk of a top 20 bank failure is small compared to the myriad other existential risks being managed by a new startup. We still don’t know if this new failure will even result in depositor losses (though for some reason HN is full of people who seem to want them). I looked at the FDIC database and it seems depositor losses are quite rare. It would be great if VCs would provide simple cash management services to their fledgling investments, though.
- mlyle 4y ago
  > It would be great if VCs would provide simple cash management services to their fledgling investments, though. It was dirt simple to just use IntraFi. You just say you want it, and sign the form. If you want a little more interest income, you do some cash flow planning and check the box for laddering.
  - wrs 4y ago
    You do have to know it exists, though. Remember the CFO at this hypothetical startup is probably really good at Python, not treasury management. And later on if you need something like a revolving AR credit line, you can’t use your IntraFi balance to collateraize that.
    - mlyle 4y ago
      OK, but one of the whole points of why you take venture money is to leverage experience and best practices. Our VCs introduced our bankers and suggested things we should do.
      - wrs 4y ago
        Totally agree -- VCs should hand out cash management support to go with the cash they hand out!
- Gwypaas 4y ago
  Exactly, I do not want anyone to lose money, but the government should not step in and cover the haircut that may or may not happen. The insured limits are plastered all over the account when you open them. If you find them unacceptable, then solve the risk they impose. Thus, an easy prudent solution is to have a second bank, likely a "too big to fail bank", with emergency funds to cover the day-to-day until you can roll over to money locked into time-based investments or the system has worked its course on the first bank. In my personal finances, I have done that in housing deals going above the insured limit by immediately moving money into government-based financial instruments. Then as appropriate, I transferred that to my preferred investments and risk profile. If I, as a layman doing a once-in-a-decade housing deal, can manage it, then a startup can.
  - deleted 4y ago
    [deleted]
- dragonwriter 4y ago
  > The risk of a top 20 bank failure is small compared to the myriad other existential risks being managed by a new startup. Its small, but also easy to at least partially mitigate.

wrs 4y ago

The risk of a top 20 bank failure is small compared to the myriad other existential risks being managed by a new startup. We still don’t know if this new failure will even result in depositor losses (though for some reason HN is full of people who seem to want them). I looked at the FDIC database and it seems depositor losses are quite rare. It would be great if VCs would provide simple cash management services to their fledgling investments, though.

mlyle 4y ago
> It would be great if VCs would provide simple cash management services to their fledgling investments, though. It was dirt simple to just use IntraFi. You just say you want it, and sign the form. If you want a little more interest income, you do some cash flow planning and check the box for laddering.
- wrs 4y ago
  You do have to know it exists, though. Remember the CFO at this hypothetical startup is probably really good at Python, not treasury management. And later on if you need something like a revolving AR credit line, you can’t use your IntraFi balance to collateraize that.
  - mlyle 4y ago
    OK, but one of the whole points of why you take venture money is to leverage experience and best practices. Our VCs introduced our bankers and suggested things we should do.
    - wrs 4y ago
      Totally agree -- VCs should hand out cash management support to go with the cash they hand out!
Gwypaas 4y ago
Exactly, I do not want anyone to lose money, but the government should not step in and cover the haircut that may or may not happen. The insured limits are plastered all over the account when you open them. If you find them unacceptable, then solve the risk they impose. Thus, an easy prudent solution is to have a second bank, likely a "too big to fail bank", with emergency funds to cover the day-to-day until you can roll over to money locked into time-based investments or the system has worked its course on the first bank. In my personal finances, I have done that in housing deals going above the insured limit by immediately moving money into government-based financial instruments. Then as appropriate, I transferred that to my preferred investments and risk profile. If I, as a layman doing a once-in-a-decade housing deal, can manage it, then a startup can.
- deleted 4y ago
  [deleted]
dragonwriter 4y ago
> The risk of a top 20 bank failure is small compared to the myriad other existential risks being managed by a new startup. Its small, but also easy to at least partially mitigate.