Tim Draper, a venture capitalist and bitcoin millionaire, has included bitcoin as part of a series of cash management recommendations offered to startup founders. Draper recommended having at least two payrolls worth of cash in bitcoin or other cryptocurrencies to avoid being affected by bank failures like the collapse of Silicon Valley Bank (SVB).
Tim Draper, a well-known venture capitalist and crypto enthusiast, has recommended bitcoin as part of his cash diversification advice for business founders. Draper, known for winning an auction of 30,000 bitcoins from the U.S. Marshals back in 2014, and for his bitcoin price predictions, posted a document on Twitter that comments on several considerations businesses should make in the face of bank failures.
Draper comments that the collapse of Silicon Valley Bank (SVB) showed the importance of having a sound contingency strategy in uncertain times.
Per different reports, many tech startups that were dependent on Silicon Valley Bank faced a period of uncertainty when the bank collapsed, not having the necessary liquidity to complete payroll payments. However, the U.S. Federal Deposit Insurance Corporation (FDIC) averted the situation and made customers’ deposits whole under a systemic risk exception approved by the Federal Reserve.
One of the key points in Draper’s cash management plan, which was designed with the help of Wharton school individuals, is the diversification of banking risk
. Draper states that businesses can no longer rely on just one institution to manage their cash, advising to keep at least six months of short-term cash in two banks — one local and one global bank.