In light of the series of events that occurred around regional banking institutions in Spring 2023, we recommend the following banking practices for companies in general:

Bank accounts

Never agree to a 100% exclusive relationship with a single bank.

Operating accounts

• Maintain two operating accounts at two different institutions*:

  • One account should be designated primary for day-to-day activities - where you sync up your finance systems like payroll, bill pay, subscription collection for incoming cash receipts, etc.
  • The other one is backup for emergency situations.

  *Certain FinTech platforms are not banks themselves. It’s critical to select platforms that partner with FDIC-insured banks, this is where your deposits ultimately sit.

• Do not keep excess cash in your operating accounts.

• Select operating account partners based on your business needs - for example, do you need foreign currency exchange, run ACH at scale, a line of credit? Make sure the selected banks / platforms can serve your business needs effectively.

• Companies might seek relationships with banks which do not typically engage with early-stage startups after receiving external financing.

Daily sweep accounts

• Set up a sweep money market account:
  • Money market accounts come in a variety of structures:

    • Those with nightly sweep features across a network of other banks will provide higher FDIC insurance coverage than the standard $250,000 per bank per depositor limit.

    • Those that stay on the bank’s balance sheet count towards the same $250,000 FDIC insurance limit in combination with your checking account.

    • Examples:

      	“On Balance Sheet” Money Market	FDIC Insurance Coverage	“Sweep Account” (with four 3rd-party banks, for example)	FDIC Insurance Coverage
      Checking	$500,000		$500,000	$250,000
      Money Market	$1,500,000		$1,500,000	$1,000,000 ($250,000 x 4)
      Total	$2,000,000	$250,000	$2,000,000	$1,250,000

• If you’re setting up multiple sweep accounts with different institutions, pay attention to the network of banks they use. FDIC insurance limit applies to per bank per depositor (identified by the same EIN).
• Recommendation is to keep 3-6 months of liquidity needs among operating and sweep accounts.
• If you have material excess cash (for example, >$10M outside of operating and sweep accounts), open a managed securities account (see below).

Professionally managed securities account

This is generally not applicable for OCV companies on Day 1. Once companies raise external funding rounds (like after Series A):

• Appoint an asset management team (or corporate cash management) to manage a portfolio of very short-term, highly liquid, US government securities. These types of accounts require a management fee. Like a brokerage account, the securities are held at a custodian (a third-party institution in your company’s name), not the bank’s name.
• The Board of Directors needs to approve a treasury mandate under which the funds are managed.
• Focus the policy on capital preservation and liquidity - not higher yields (which will be more risky and can jeopardize the business).

Bank account management practices at OCV Companies

Following the shakeup in startup banking in 2023, we’re closely monitoring available banking options and will review and update our finance ops processes periodically.