In March 2023, Silicon Valley Bank failed. It was the 16th-largest bank in the country, holding roughly $175 billion in customer deposits, and more than 85% of that money was uninsured. A huge share of it belonged to startups that had done nothing wrong except keep their entire operating balance in one account, at one bank, above a government insurance limit most founders have never actually read.
That's not a story about SVB being a bad bank. It's a story about what happens when "where do we keep our cash" never gets asked as a separate question from "how much cash do we have."
The number that actually matters: $250,000
The FDIC insures deposits up to $250,000 per depositor, per bank, for each account ownership category. A business account is its own ownership category, separate from any founder's personal accounts at the same bank, and every dollar your company holds at that one bank, across every account there, gets pooled into a single $250,000 limit.
Above that line, in the FDIC's own words, any amount in a demand deposit account is effectively an uninsured loan to your bank. Most startups with more than a couple hundred thousand dollars in the bank are, whether they realize it or not, extending that loan every day.
Liquid isn't the same as safe
The instinct after hearing that is to move everything into something that pays more than a checking account. That's the wrong first move. The right first move is separating two questions that get treated as one:
- How much do I need access to immediately? This is your near-term operating cushion, roughly what covers 1 to 2 months of burn, plus a buffer for anything unpredictable. This stays liquid, in a checking account, full stop.
- How much can I afford not to touch for a while? This is everything else. It doesn't need to sit in a zero-yield checking account, and it doesn't need to sit fully exposed above the FDIC limit either.
Foundation Capital's guidance to founders is blunt on this point: keep demand deposits under or close to the $250,000 FDIC-insured amount, and put the excess into a money market mutual fund or an insured cash sweep product, both of which spread deposits across many banks automatically so no single failure touches your whole balance.
What "the excess" can actually do
Once cash is separated from the checking account, it has options that checking accounts don't:
A money market fund or insured sweep product keeps the money essentially as liquid as cash, available within a day or two, while spreading FDIC coverage across a network of banks instead of concentrating it at one.
Treasury bills go a step further. They're backed directly by the U.S. government, carry close to zero default risk, and typically pay more than a checking account. The tradeoff is real: a T-bill locks your money until it matures, and selling one early can mean taking a loss if rates have moved against you. The common way founders manage that tradeoff is laddering, buying T-bills with staggered maturities so some portion is always coming due and rolling back into cash, rather than locking everything up at once.
How this scales with company size
Foundation Capital's guidance graduates with how much cash is actually sitting in the bank: smaller startups are usually fine with a basic money market fund or insured sweep setup and nothing more complicated. Once cash holdings cross roughly $5 million, it's worth having a dedicated finance person own this instead of it being a founder's side project. Past roughly $10 million, it usually justifies actual treasury management, laddered T-bills and all.
The bank itself is a decision, not an afterthought
The other lesson from SVB, separate from where the cash sits, is which bank holds it. Foundation Capital's recommendation: open accounts at two banks from the start, and keep enough at the second one, 1 to 2 months of operating expenses, to keep running if something goes wrong at the first. Pick banks on service quality, not marketing. The insurance and sweep structure is what actually protects you if one of them fails.
None of this requires predicting the next bank failure. It requires treating "where does our cash sit" as a real decision made in advance, not a question you're forced to answer at 11pm on a Friday because a bank just made the news.
Want a cash structure that's actually built for how your company holds money?
Finsight's Founder FP&A Framework covers this as part of the full picture, alongside runway and burn, not just tracked in a spreadsheet.