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What happened: After the Silicon Valley Bank's (SVB) implosion in March, Congress pushed to raise the $250,000 FDIC deposit insurance limit. However, the initiative has received pushback from conservative groups and trade associations. Irrespective of the limit changes, startup founders have several other options from banks that offer accounts with higher deposit protection above the FDIC insurance limit, per Kruze Consulting. Relevance: Information collated by Kruze shows that banks, such as Bank of America, provide insurance to cover deposits up to $6M. First Republic Bank and Bridge Bank offer a service that expands the FDIC insurance coverage to $150M by distributing the deposits across their respective network of banks. In addition, several neo-banks, such as Brex and Mercury, also cover deposits up to $5M and $6M, respectively. Why it matters: Startups, on average, had $5.5M in cash deposits in early 2023, with median cash runway figures of 10 months, per another Kruze Consulting report. Due to the volatile economic conditions, startups need to de-risk their cash and store it in safe places. Startups can open insured cash sweep accounts — through which the banks open multiple accounts across several FDIC-insured institutions — invest in short-term government debt, or use money market funds to de-risk their available capital. |
