Before the crisis, close to 60% of startups had an account with SVB and SVB held 50% of all startup cash. Now, less than 20% of startups’ cash is collectively with SVB, and no single bank holds half of the startup ecosystem’s cash.
Kruze Consulting, the startup accounting and CFO consulting firm servicing more than 800 venture funded startup clients, has released new data on how startups have changed their banking strategies a year after the SVB collapse. According to the data, JPMorgan Chase has gained the most significant market share – moving from about 15% pre-SVB to more than 60% by the end of 2023. Additionally, almost all startups maintain at least two banking relationships and some VCs are even demanding this strategy in their financing documents.
Before the crisis, close to 60% of startups had an account with SVB and SVB held 50% of all startup cash. Now, less than 20% of startups’ cash is collectively with SVB, and no single bank holds half of the startup ecosystem’s cash.
A new analysis from Kruze also analyzed how startups created after the crisis are banking. Half of all new startups have an account with JPMorgan Chase, 40% with Mercury and just over 25% with Brex (both of which are not technically banks!), whereas only 8% have opened SVB accounts. And Mercury has become the defacto leader in new startup deposits, holding half of all newly formed startups’ cash. It appears now that startups favor the strategy of pairing a large institutional bank with the startup-focused offerings from Brex or Mercury.
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“The way startups look at banking has forever changed post-SVB. Pretty much every startup now maintains at least two separate banking relationships, so moving cash between banks can be faster than it was pre-SVB,” said Healy Jones, Vice President at Kruze Consulting. “This is a great hedge against another crisis, but it also makes another crisis more feasible as startups can run from their bank faster than before.”
The rise in other banks has been slow but steady, with a number of more traditional banks trying to win share by selling their safety – and often selling venture debt. However, the rise of the non-banks with solid UX like Mercury and Brex does clearly show that many founders are choosing speed and an app user interface over the well publicized balance sheets that the biggest, traditional banks have. As we move forward, the competition among banks will likely intensify, focusing on who can offer the most seamless and supportive banking experience to the entrepreneurial community, indicating that the evolution sparked by the SVB collapse is far from over.
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