Banking Best Practices for Founders

Whether in the early stages of your startup journey or the later stages of growth, you need a trustworthy bank. But that’s only the first step.

Historically, founders partnered with a bank that offered good service, understood their business, provided assistance from experts, and had relevant offerings. However, banking considerations have changed since Silicon Valley Bank’s (SVB) failure in March 2023.

“When SVB failed, it was chaos,” Minh Le, Managing Director of Stifel Venture Banking, explains. “People had all their cash in one bank and couldn’t access funds to complete payroll and vendor payments.”

That’s why having a single bank relationship doesn’t hold the same appeal it once did. Instead, companies are considering operational and safety risks when selecting banks.

For financial security and operational resilience and to ensure you can continue making payroll if your primary banking partner fails, have a backup bank with a couple of payroll cycles in cash reserves. While your main bank should offer high-quality service, products tailored to your business needs, domain expertise, diversified services, and a team that understands your business and goals, your secondary bank should provide cash management products and practice proper balance sheet management.

Banking Operational Best Practices

Early Stage

Simplify your payment and treasury needs to focus on growth. Consider having a single operating account with fraud controls, using an FDIC-insured sweep product for better yields, and taking advantage of a credit card program to maximize rewards and limit fraud exposure. You should also establish a direct file feed to your accounting software for efficient bookkeeping and reconciliation. Explore securing a credit facility that extends your financial runway – especially if early indicators suggest a strong product-market fit.

While some founders don’t worry about treasury management until further down the road, it’s never too early to consider how you can strengthen and protect your company’s capital. Have ample liquid cash on hand, and take advantage of various investment opportunities to boost profits. A good treasury team can also make all the difference.

“I work with founders of everything from early-stage startups to established corporate public enterprises, so I know what they need to consider as far as their banking structure, reconciliation, ERP systems, and more,” Kate Arrighi, Vice President, Stifel Senior Banking Treasury Sales Manager, says. “Not only will I help you make banking easy today, but I’ll also think of other beneficial Treasury services and ensure banking remains as easy as possible when you scale.”

Growth Stage

Prepare to scale efficiently by delegating banking to a trusted finance team, who can take some of the burden off your Vice President or Chief Financial Officer, handle foreign currency requirements, and keep up with your growing business. When it comes to your banking relationships, consider segregating accounts and implementing dual controls for payment authorization to enhance reconciliation and bolster security.

You may also adopt a spend management tool, increase yield via an actively managed bond portfolio, upgrade your direct file feed to a new Enterprise Resource Planning (ERP) system like NetSuite, and explore growth capital facilities for diversifying capitalization, extending your financial runway, or facilitating strategic mergers and acquisitions. If your startup makes or receives payments in foreign currencies, you’ll also need to navigate different countries’ tax laws carefully.

Pre-IPO Stage

Establish a top-notch finance team for a smooth transition to a publicly traded company. Prioritize an experienced CFO, financial transparency, compliance, and efficiency. This means implementing a structured account system to:

• Accommodate multiple entities
• Ensure SOX compliance
• Maximize Earnings Per Share
• Finalize a board-approved investment policy that optimizes any surplus cash

But regardless of which stage your startup is in, it’s crucial that you diversify your institutional risk and ensure there is plenty of redundancy. Maintaining redundancy by keeping roughly two months of payroll at a second financial institution – or even adding a third banking partner – can provide peace of mind and allow your startup to stay afloat if something happens at your primary bank.

Similarly, you’ll want to retain several foreign currency providers, integrate with many credit card providers and backup payment processors, and forge relationships with several people at your financial institution to avoid having a single point of failure. It’s also a good idea to reduce or eliminate your reliance on bank-dependent deposit accounts. Instead, use fully liquid, FDIC-insured sweep products, and if you have a later-stage startup, follow your board-approved investment policy to preserve your equity dollars.

Why Stifel Venture Banking Is The Right Bank For You

Full-service commercial banking and lending comes down to the stability of your bank, the strength of your financial strategy, and the advisors you work with. Luckily, Stifel excels in these areas, making us your ideal banking partner.

Choosing Stifel means partnering with a public company that has a roughly $7 billion market cap and offers diversified financial services, including wealth advisory, investment banking, and commercial banking. Our strong balance sheet includes:

• Over 80% of FDIC-insured deposits 
• A short-term bond portfolio with an average duration of 1.3 years
• Insured Cash Sweep (ICS) program that provides FDIC insurance coverage up to $225 million per insurable capacity

What’s more, Stifel provides unparalleled service and expertise. The best partners call out your blind spots before they become pain points – and Stifel’s team is more than up to the task.

“​​We’re here to take the work off your plate and provide suggestions targeting things you might not have thought about,” Kate shares. “We’re always thinking ahead – and that goes beyond considering credit cards and additional services to boost your business.”

Stifel’s team comprises seasoned venture banking relationship managers backed by all the local resources and international reach that come with over 130 years in global financial services. These managers will serve as your daily point of contact, providing expert guidance tailored to your unique financial needs.

“I’ve worked with just about every tech CFO in town over the last eighteen years,” Minh says. “My background spans companies at all stages, so I’ve seen challenges that entrepreneurs face and helped them navigate countless issues. But if there’s an issue I haven’t seen, I can connect you with someone who has dealt with it.”

Ultimately, Stifel is your one-stop shop. As a founder, you’re likely so focused on your professional life that you miss prioritizing critical personal matters, including planning for your family’s financials and general wealth. But Stifel’s comprehensive and collaborative suite of in-house services with teams accessible by phone, email, or text can provide prompt, personalized assistance that covers all bases.

“We can help take care of you professionally and personally, helping your business grow as well as your personal life,” Minh says. “I don’t consider myself a commercial banker. I also see myself as your business partner, capable of guiding you through every phase of your company’s journey and personal life.”

Ready to experience peace of mind and incredible service designed to make life easier for founders?