Tips and Information on managing your startup’s cash safely and efficiently.
Cash management for startups overview
Cash management at a startup covers two key aspects: the administration of cash inflows and outflows, and keeping your startup’s cash safe while earning an acceptable yield.
We’ll first address how to safely earn yield, then cover tips for administering your company’s inflows and outflows of money.
In their initial stages, startups don’t tend to generate meaningful revenue or profits. However, companies that raise venture funding tend to have outsized balance sheets, so cash management focuses on preserving the company’s capital and maximizing liquidity. Of course, earning some yield (safely) is also nice!
Safely managing startup cash
Following SVB’s meltdown, startup founders are looking for the safest cash management options. FDIC insurance offers protection up to $250,000, which is clearly not enough protection for a startup that has raised outside funding from VCs or professional investors.
Thankfully, many banks and fintech companies offer products that attempt to provider more than the $250,000 in FDIC coverage. These safer treasury management solutions tend to fall into three different buckets:
- Insured Cash Sweep accounts take your deposits and spread them out over multiple FDIC insured banks, keeping your account balance at any particular bank under the $250,000 insurance limit. Cash is quickly available and, in theory, quite safe.
- Government Bonds are considered the safest investments on the planet, and the best startup treasury / cash management providers offer safe ways to put your cash into government debt. There are lots of nuances around choosing the right maturity date when working with bonds that a good banking partner can help you manage.
- Money Market Funds are mutual funds that invest in safe, short-term securities. These are investment vehicles, and are not FDIC insured. But they are considered quite safe. Work with a solid treasury management partner to figure out if this makes sense for your startup’s cash.
Read our article on FDIC insurance for startups to see a list of various providers and their products.
Building Stability With Smart Cash Management
Effective cash management can make the difference between a startup that succeeds and one that runs out of funds too soon. By balancing safety, liquidity, and modest yield, founders can ensure their capital is protected while remaining flexible enough to fuel growth when opportunities arise. Ultimately, managing cash responsibly isn’t just about preserving runway – it’s about creating the financial stability and confidence needed to build a lasting, successful company. Contact us for more information.
