Treasury Management for Startups: Where to Keep Cash After a Raise

Closing a funding round leaves a startup with more cash than it has ever held. Where that money sits matters. The 2023 collapse of Silicon Valley Bank showed how quickly a banking problem can become a company-threatening crisis, and how few founders had thought carefully about treasury management.

Treasury management for startups is not about maximising yield. It is about keeping cash safe and available while earning a sensible return. This guide explains the priorities, the main options and how to set a simple treasury policy. For choosing and structuring bank accounts, see our companion guide to startup banking after SVB.

1. The Three Priorities, in Order

1. Safety. The cash must be there when you need it. Losing principal can end a company.
2. Liquidity. You must be able to access money for payroll, suppliers and emergencies without delay.
3. Yield. Only after safety and liquidity are secure should you think about returns.

2. Understanding Deposit Insurance

In the US, FDIC insurance covers deposits up to $250,000 per depositor, per insured bank, for each ownership category. A startup holding millions in a single bank account is therefore largely uninsured. Options to extend protection include:

• Multiple banks, splitting operating and reserve accounts.
• Deposit sweep networks, such as IntraFi's services, which spread deposits across many banks to extend insured coverage.
• Treasury platforms offered by banks and fintech providers that combine sweeps and money market funds.

3. Common Places to Hold Cash

• Operating accounts for day-to-day spending, typically holding a few months of expenses.
• Government money market funds, which invest in short-term government securities and typically offer daily liquidity.
• US Treasury bills, short-term government debt that can be held directly or through a brokerage or treasury platform.
• Insured sweep accounts for balances above operating needs.

4. What to Avoid

• Keeping all cash in one bank.
• Chasing yield with longer-dated bonds, corporate credit or complex products.
• Holding company treasury in cryptocurrency or other volatile assets.
• Lock-ups that prevent access to funds when needed.
• Unclear authority over who can move money.

5. Build a Simple Treasury Policy

A short written policy, approved by the board, should cover:

• Objectives: safety, liquidity, then yield.
• Permitted investments, such as insured deposits, government money market funds and Treasury bills.
• Limits on exposure to any single bank or fund.
• Maturity limits, for example no investment longer than a year.
• Who can approve transfers, with dual authorisation for large payments.
• Reporting to the board, usually monthly or quarterly.

See startup boards and governance.

6. Match Cash to Runway

A practical approach is to divide cash into tiers:

• Tier 1: two to three months of expenses in operating accounts.
• Tier 2: the next several months in highly liquid money market funds or insured sweeps.
• Tier 3: longer-dated cash in short-term Treasury bills, laddered to mature as needed.

See runway planning.

Frequently Asked Questions

How much of a startup's cash is FDIC insured?

Up to $250,000 per depositor, per insured bank, per ownership category, unless sweep networks or other arrangements are used to extend coverage.

Are money market funds safe?

Government money market funds are generally considered low risk, though they are not bank deposits and are not FDIC insured.

Should startups invest in Treasury bills?

Many do for cash not needed in the near term, since they are backed by the US government and can be laddered to match spending needs.

Who should approve treasury decisions?

The CEO or CFO within a board-approved policy, with board oversight and regular reporting.

The Bottom Line

After a raise, a startup's cash is its lifeline. Prioritising safety and liquidity, spreading deposits, using government money market funds and Treasury bills, and following a simple board-approved policy protects that lifeline while earning a sensible return.

Global Capital Network connects founders with investors and advisers through our events and network. Get in touch to learn more.

This article is general information, not financial or investment advice.