Following the Silicon Valley Bank receivership and growing concerns about global banking stability, many talented startup founders—through no fault of their own—are now facing tough questions about how they’ll cover payroll in the weeks ahead.
To help founders and leadership teams at software companies navigate this stressful situation, we want to share some practical guidance.
First, we recognize that some of these strategies might not feel obvious at first glance. We also know that implementing them may create new challenges along the way. However, by combining a mix of short- and long-term solutions, founders can not only manage today’s unexpected cash crunch, but also build a more resilient and diversified capital strategy for the future.
How to access cash right now
If you’ve been directly or indirectly affected by the SVB receivership, there are immediate steps you can take to strengthen your liquidity. Start by opening a new bank account and making sure customer payments are no longer being sent to SVB.
When choosing a new bank, founders should also:
- Look for a bank that offers insured cash sweep accounts: With sweep accounts, your funds are automatically moved to a safer third-party institution at the end of each business day. While these accounts are designed to minimize idle cash, they’re especially valuable right now because these transactions don’t appear on SVB’s balance sheet and all deposits remain insured.
- Consider a bank that doesn’t focus mainly on venture-backed startups: For nearly forty years, SVB was a major player in the startup ecosystem. While this was a strength for innovative companies, it also meant that when SVB went into receivership, a huge portion of the startup community suddenly lost access to their funds on March 10. By choosing banks with a more diversified client base and more stable investments, you reduce the risk of future insolvency.
- Consider temporarily routing customer payments to personal accounts until you set up a secondary business account: As mentioned above, this might not feel like a natural step, but it’s a responsible move if you’re still weighing your options while the banking situation stabilizes.
What other short-term cash options are available to founders?
Building a startup is all about relationships—with customers, investors, and your network. In uncertain times like these, it’s crucial to lean on those connections to help secure your runway.
One approach is to ask customers with invoices due in the next 30 days to pay early in exchange for a small discount. The ability to offer discounts (and the size of those discounts) will vary, but a quick cash boost could be the difference between making payroll or not.
Another option: reach out to your investors and ask them to inject additional liquidity into the business. The SVB situation is widely known, and there’s a lot of empathy for those affected. If you’ve kept your investors informed and engaged, now is the time to ask for their support—and their vote of confidence in your company.
You can also contact your payroll provider to explore payroll loan options. While many banks offered emergency bridge loans right after SVB’s closure on March 10, most of those have expired now that the FDIC has guaranteed all accounts and restored access to funds as of March 13. Still, with ongoing liquidity concerns, it may be worth looking into payroll-specific loans to extend your runway.
Other lenders like Capchase, Lighter Capital, Brex, and Lendio may also provide immediate relief for founders facing a cash crunch.
Prioritize spending and consider delaying payments
One of the most important things you can do as a founder is to tighten your budget across the board. Identify which expenses you can pause for now, and where you can safely delay payments. Some easy places to start include:
- AWS sandbox environments for development and testing
- Paid marketing
- Travel & entertainment
It’s also smart to reach out to your vendors directly to discuss extended payment terms. Be sure to have these conversations before you decide to stop payments—there’s a lot of goodwill toward startups affected by the SVB fallout, and vendors may be more flexible than usual about postponed payments. This includes talking to your landlord if you have office or retail space.
Unfortunately, this may also impact your team. If cash is tight, it makes sense to freeze hiring plans and, if possible, delay start dates while you explore other liquidity options.
You might also consider asking executives to accept payment in kind, either with a low interest rate for the next 30 days or in the form of equity from your company’s option pool. And of course, now is the time to pause discretionary bonuses and any variable pay.
Looking ahead: Plan your cash inflows and outflows strategically
Ultimately, as a founder, you need to shift your mindset in light of recent events and adapt to your new reality. If you’re feeling the squeeze, you’ll need to update your operating assumptions (for example: $X million in the bank, $Y monthly burn, and Z months of runway) based on your actual cash in and out.
Founders should assess when (and how much) they’ll recover from uninsured deposits and run new sensitivity analyses (for example: what if I don’t get access to my uninsured deposits for [24 weeks], or only recover [60%] of the funds?).
When it comes to cash inflows, founders must:
- Know exactly when you’ll receive customer payments
- If you have high customer concentration, make sure you know exactly when your large customers will pay you
- Find out if any of your customers have been affected by SVB
- Always know your “cash zero” date
The most important message I want to leave founders with is this: You CAN get through this, and you’re not alone.
While there’s still a lot of uncertainty, remember that you’re part of a larger startup community—including many of us at Boast—who understand firsthand the challenges of launching and funding a business.
Check out our recent webinars for more tips on diversifying your capital strategy, or book a call with our team today to see how Boast’s technology and expertise can help you move forward.
