“A crisis is a moment to learn a lot … If you make the right decisions now and you put yourself in a position to be aggressive as things get better, that's where winners are built.” —Michael Linford, CFO at Affirm*
Cash management has always been critical for startups to get right. But with several banks we depend on under pressure, the rules are being rewritten in real time. As we all adapt to a new normal, what should founders, CEOs, and other leaders know about managing their startup’s cash and other financial assets?
To hear the latest best practices, we turned to finance leaders at both public and private companies in the GGV community including:
As shared in a recent virtual roundtable for GGV’s portfolio companies, check out these strategies for effective cash management:
To diversify institutional risk, this may include establishing best practices like:
When it comes to managing excess cash, my experience as a VC and active board member of startups has shown me that maximizing yield is not as important as cash preservation and flexibility. After all, “liquidity is a security blanket that lets you sleep soundly at night,” Michael says.
Consider best practices like:
Given the rise in phishing attacks, take the time to examine your internal workflows for everything from wire transfers to inquiries from merchants and suppliers.
Consider processes like having one person initiate a transfer and another approve it. As with Fairmarkit, a certain threshold should require approval from two people, and anything above a set limit should require a green light from both the CFO and CEO.
Whether it’s relying on a private peer group or getting advice from other forums like GGV’s Slack community, “we’re in a pivotal moment right now,” Celeste says. She recommends using this time to develop your team, share best practices, and empower them to be part of the solution.
For leaders who have navigated previous crises, today’s volatility may leave some teams feeling like it’s Fall 2008 or even the early 2000s. But for many employees, it’s important to be aware that this may be their first major economic crisis.
Remember: “This is a moment of personal growth and learning and development even if it's stressful,” Michael says. “A lot of companies don't make it through these kinds of crises. And those who don't create opportunities for those who do, which means those who can manage the risk carefully end up being a lot stronger and faster as a result.”
Check out these other helpful resources for storing and managing your startup’s cash:
Founder Considerations for a Cash Management Policy
To develop a sound cash management policy, consider these guidelines by GGV Capital with B Capital Group, General Catalyst, Greylock, Kleiner Perkins, Mayfield, and Redpoint. Read more
How to Optimize Working Capital with Treasury Fundamentals [J.P. Morgan]
From freeing up internal liquidity to scrutinizing external funding, explore how to better manage your startup’s working capital. Read more
Treasury Management Throughout the Lifecycle of a Startup [Arc]
Learn how founders with limited resources can duplicate the results of a full-fledged treasury management program. Read more
How to Adopt an Effective Cash Management Strategy for Your Startup [Mercury]
Discover how to strike the right balance between earning, spending, and investing for continued growth. Read more
Four Cash Management Tips for Startups [The Wharton School]
Even though the world has changed since 2014 when this piece was first published, many of the tips are still relevant today. Read more
A CFO’s Best Advice for Budgeting Amid Macro Uncertainty [Managing Partner Glenn Solomon at GGV Capital]
Just as a football team may have 50 plays that it plans to run going into a game, Domo CFO Bruce Felt shares how scenario planning can help you shift strategies without missing a beat. Read more
Turbulent Banking Sector Renews Interest in Cash Management and Investment Policies [Goodwin]
From being mindful of maturities to paying attention to third-party risks, here are some ways to manage your cash and investment risk effectively. Read more
Treasury Is the Most Underrated Team in Your Company [Toptal]
Once you understand the basics of treasury management, learn how to structure your startup’s treasury team with key functional roles for maximum productivity and efficiency. Read more
For founders and leaders at GGV’s portfolio companies, check out our Founder Portal for resources and templates including sample investment policies and more.
*Represents a company in GGV’s portfolio