1. Diversify Institutional Risk

Mitigate risk by maintaining accounts across 2-3 institutions at all times. At least one should be a Global Systematically Important Bank (G-SIB), like JP Morgan, Société Générale, Deutsche Bank. The extra logistical effort is worth it. Take care to maintain an updated reporting of what each account is used for and their respective balances. In the event of a crisis, this will enable you to react more quickly.

👉 Example: Manage payroll from account X, customer payments from Y, and pay your office rent from Z.

WARNING: Be aware that many neobanks and financial service companies (Qonto, Shine, Brex, etc.) don't provide access to short-term credit, nor do they offer access to government backed loans. In France, during COVID, customers of neobanks were unable to obtain government backed emergency funds leaving them in a tricky situation

2. Split Cash Allocations Based On Duration and Use

There's no benefit to keeping all your eggs in one basket. Manage your money based upon your runway and monthly cash burn. Make the most of financial service providers like Qonto, Shine, or Brex for your day-to-day cashflow, while maintaining a strong relationship with traditional banking institutions for your long-term holdings.

Ensure you maintain at least equivalent of 3-months salary in accounts protected by deposit guarantees (FDIC in the United States, FGDR in France, Deposit Guarentee Act in Germany). These guarantees are either per account, or per institution. In order to ensure maximum coverage, you may need to separate funds across several account/instituions.

3. Fraud Prevention

The moment you announce your fundraising round, you become an attractive target for bad actors who now know you are cash-rich.

Create a process to prevent fraud

Implement a process of approvals and verification for meaningful money movements, tiered based on the amount. We recommend at a minimum implementing the "four eyes" principle of approvals (via phone or in person) and lowering the bar for larger wire approvals from the CEO and possibly the board. Any changes to payment instructions must be verified through multiple channels.

👉 Example: if you pay the monthly legal bill into a specific account and receive a letter asking to change the account, please verify. Changes such as this are typically a red flag. To verify, call numbers on the corporate website, not those listed on correspondence.

4. Ensure there are no single points of failure

Implement redundancies in approval processes. Ensure that one individual doesn’t become a bottleneck in the process. Add multiple signatories on key accounts and establish solid internal policies about what to do in emergencies.

👉 Example: Imagine if your CEO is unreachable for several days, and they’re the only one able to make an urgent payment to one of your key service providers. Try to avoid situations where one single person (who could get sick, or go on holiday) has the only access to your critical infrastructure and cashflow.

5. Checklist for Selecting a New Banking Partner

Preferred Bank Contacts