Tim Draper suggests that startups use Bitcoin to mitigate bank risk

It is suggested by venture capitalist Tim Draper that companies should consider using Bitcoin as a method of hedging risk.
When Silicon Valley Bank (SVB) faced a collapse in March 2023, numerous cryptocurrency and technology firms were suddenly unable to access their funds.
SVB was known for catering to venture capital-backed tech startups, including crypto firms like stablecoin issuer Circle. With $3.3 billion of Circle’s USD Coin (USDC) reserves held by SVB, the stablecoin depegged temporarily to $0.88 as SVB became illiquid.
The crisis was averted only after it became evident that the United States government would intervene to rescue SVB, leading to the recovery of USDC.
This incident served as a significant wake-up call for Draper, who discovered that many companies in his investment portfolio had entirely invested their capital in a single institution.
During the AIM Summit London in April, Draper shared, “When Silicon Valley Bank went under, there was a widespread panic as a third of our companies were solely banking with SVB.” Several companies were left unable to cover their next payroll due to the bank’s collapse.
Draper recounted receiving numerous calls for assistance, agreeing to provide additional funds for payroll but emphasizing the cost and that it would only cover one pay period. Fortunately, the government intervened by bailing out SVB the following Monday.
Despite the relief brought by the bailout, concerns remain about the potential for another SVB-like crash in the future, as highlighted by Emma Hagan, SVB’s former chief risk officer for Europe and the Middle East.
Draper insists that his companies establish a treasury department to prevent a similar shock in case of another bank failure, advising them to diversify beyond traditional banking by allocating a third of their capital to Bitcoin (BTC).
Danny Chong, co-founder of Tranchess, emphasized the importance of treasury management, noting that while investments in high-interest financial products are beneficial, maintaining liquidity is crucial.
In light of SVB’s collapse attributed in part to poor treasury management, Draper now advocates for dividing capital into three tranches: one-third in a large bank, one-third in a small bank, and one-third in Bitcoin.
Frambot, CEO of Morpho, also stresses the significance of diversification and low-risk yields in treasury management, highlighting the need for traditional banking facilities alongside crypto investments for stability.