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I'm going to use this text, posted in last week's thread, as a jumping off point to make a little effortpost on a boring area that's actually kind of important, and where I know a little bit: treasury management!
This will only happen if your CFO is incompetent and doesn't do treasury management.
Treasury management - the most basic practice of any corporate finance department - is the practice of managing corporate cash in order to earn interest on what isn't being used , ensure that whatever cash is needed by the business is available, and also minimize tail risks like your bank going belly up.
Step 1 is observing that you can get 4.5% on 4 week treasuries. These are, regardless of amount, backed by full faith and credit of US Gov.
Now suppose you are a business with $500k of biweekly expenses ($500k due on Mar 15, $500k due on Mar 31). You have $20M in venture capital remaining which gives you about 1 year 8 months of runway.
All of that - minus $500k or so needed for short term investments - goes into 4-8 week treasuries which you reinvest whenever they mature. This earns 4.5% or about $900k/year in essentially free money. Money sitting in government bonds with duration < 90 days is called cash equivalent by corporate finance people.
Your not incompetent CFO just extended your runway to 1 year 9 months.
Step 2: ensure that the maturity dates of these cash equivalents line up to your payroll dates. $500k cash is due on Mar 15 for payroll/etc. Fortunately, $500k worth of your 4 week treasuries got turned into cash on Mar 9 (typically the maturity date is thurs).
Another $500k cash is due on Mar 31. You have another $500k worth of 4 week treasuries maturing into your bank account on Mar 30 (a thurs) or maybe Mar 23 (also a thurs) if you really want to be safe.
Step 3: line up a short term credit facility.
Some expenses are less predictable. Part of the job of CFO is to project these expenses, come up with upper bounds, and inform the CEO what it will cost if these bounds are exceeded. Then the CFO goes to a few banks and lines up credit facilities - a $2-3M line of short term credit backed by cash equivalents from step 2.
Step 4: have a few bank accounts including one at a "too big to fail".
That's treasury management, obviously oversimplified.
Now suppose your CFO actually did his job. It's Mar 13 and SVB just imploded. You had $500k sitting in SVB for Mar 15 payroll and that's locked up. Here's what you do:
Mar 11: Quickly call up your credit facility and tell them to wire $500k to your payroll provider on Mon. Call your payroll provider and tell them to confirm with the bank that this is happening to avoid any snafus.
Mar 13-14: As soon as SVB allows it, wire the $250k FDIC insured money to your credit facility. Also redirect treasury maturity payments to said account, and take another $250-270k of cash equivalent and don't reinvest them.
Mar 16 or Mar 23 (a thursday when your maturity payment gets deposited): get $270k worth of 4 week treasury maturity payments from the US govt. Wire this money back to your credit facility.
Net result is that you make payroll with no interruption. You just lost $250k to SVB's errors and paid your credit facility $20k in interest. The end.
My impression from reading Hacker News comments this past weekend is that even having a CFO is an unfair expectation to levy against a fledgling startup.
Tech world is really coming off as a bunch of little over paid children right now.
Because a massive bank lied to them and because incompetent federal regulators didn’t catch it?
Should they just have already assumed the government was made up mostly of completely useless rent seeking tyrants? Keep in mind a lot of them are pretty young and may not have figured that out yet.
I'd argue being young is even more reason for them to know. My wife's boomer parents are still living on in the shadow of their upbringing, where they assume the institutions (at least the ones run by Democrats) are unquestionably good, honorable, trustworthy and competent. The continuous rolling systemic weaknesses and disasters of the last 20 years have done absolutely zero to disabuse them of that notion. Where as, I've seen numerous polls that show young people who've grown up knowing nothing but the the absolute clusterfuck of the last 20 years have record low levels of trust in institutions.
All that said, I found this data point which makes me question a lot of that, and maybe come around to your side.
https://www.statista.com/statistics/1078192/trust-government-generation-us/
Some of the data points are funny. Like in 2009 after Obama won the presidency, Millennials had a 43% trust in government. That doesn't last. Biden being elected in 2020 results in a fairly large bump in trust for every generation except Millennials. Weirdly enough the data skips straight from Oct 2015 to April 2017, so we don't get a snapshot of the post Trump trust score.
So I donno, looking over the data, it may be hard to tease apart age cohort from political party in power, with younger cohorts generally trusting D's more, and older cohorts seeming to trust R's more. With the seemingly notable exception of Biden. In fact, when I really look at Millennials on the last 20 years of the graph, they do seem abnormally trusting. Once again, with the giant glaring exception of Biden winning office. What's up with that?
I’m late GenX, and I took “government” class in high school. I’ve heard Boomers talk about “civics” class, but my cohort and younger talk about “social studies” classes. Not a comprehensive answer, just an anecdote which might be a piece of the puzzle.
Millennial here (or at least definitely somewhere between GenX and Zoomer), we indeed had Social Studies (mostly history, maybe also literature) when I was in public school. When I transferred to a charter school, I had more specific history classes. Didn't exactly have civics.
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Back in my day we had “social studies” in elementary/middle and “government” in high school. The former was state and national history. Looks like the current requirements have a “social studies” category including history, government, geography and sometimes economics.
I think it’s a catchall term, not a shibboleth.
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