In the aftermath of the Silicon Valley Bank collapse, startups are increasingly diversifying their banking relationships, with JPMorgan Chase emerging as a dominant player and fintech platforms like Mercury gaining ground.
In a dramatic shift spurred by the Silicon Valley Bank (SVB) collapse a year ago, the landscape of startup banking has undergone significant transformation. Startups, traditionally known for their single-bank loyalties, are diversifying their banking relationships in the wake of one of the most disruptive events in the tech financing sphere. San Francisco-based Kruze Consulting, a leading firm offering accounting and CFO consulting services to over 800 venture-funded startups, has unveiled data illuminating these changes, indicating a particularly striking ascendancy of JPMorgan Chase in the startup banking market.
Before the fallout, SVB was the banker of choice for a considerable portion of the startup ecosystem, boasting relationships with close to 60% of such companies and holding about 50% of all startup cash. The collapse, however, has drastically reduced SVB’s hold to less than 20% of startups’ cash and no single bank now dominates the market share. Instead, JPMorgan Chase has experienced a meteoric rise, capturing more than 60% market share by the end of 2023 from approximately 15% pre-SVB collapse, showcasing the seismic shift in startups’ banking preferences.
Significantly, the Kruze analysis sheds light on a newfound prudence within the startup community, with almost every startup now maintaining at least two separate banking relationships, a strategy increasingly demanded by venture capitalists in financing agreements. This diversified banking approach has emerged as a hedge against potential banking crises, allowing startups the agility to move cash swiftly between financial institutions, hence mitigating risks associated with banking with a single entity.
In an interesting development for the fintech sector, the report highlights the rise of non-traditional banking platforms such as Mercury and Brex. Despite not being banks in the conventional sense, these platforms are attracting a significant share of new startups, drawing in 40% and over 25% respectively, with Mercury positioned as the leading entity for new startup deposits. This trend underscores a valuation shift among founders towards platforms offering rapidity, user-friendly interfaces, and startup-tailored services over traditional banking benefits like extensive balance sheets.
The series of transformations signal a broader evolution within startup financing, underscoring heightened competition among banks to court the entrepreneurial sector by offering the most seamless, supportive, and innovative banking experiences.
Kruze Consulting, having supported its clients through over $15 billion in venture capital fundraising, sits at the nexus of this evolving ecosystem. The firm’s insights into these shifts reflect deep engagement and understanding of startup needs and challenges. As the industry continues to navigate the post-SVB landscape, the lessons learned and strategies adopted will undoubtedly continue to influence the trajectory of startup banking and financing for years to come.
Founded by Vanessa Kruze in 2012, Kruze Consulting stands as a testament to the intersection of traditional financial services and the innovative tech sector, providing a comprehensive suite of services tailored to the dynamic needs of startups. As the landscape continues to shift, Kruze’s role in guiding startups through these changes remains pivotal, offering clarity and stability amid the constantly evolving financial terrain.
