For startup competition, SVB’s nightmare is a victory and a challenge

Picture credits: David Paul Morris/Bloomberg/Getty Images

Sometimes quitting stealth isn’t your own choice: it’s a force function of two of your biggest competitors evaporating from the business, and the third triggers customers so much that we’re talking about a bank rush. At least that’s the case with Series CEO Brexton Pham, who has been building a comprehensive enterprise platform for institutions and enterprises since March 2021.

As the threat of a bank run looms at Silicon Valley Bank, days after the collapse and impending closure of Silvergate and Signature Bank’s continued pushback from crypto clients, Pham found himself in “the craziest week ever”. The series, which features corporate bank accounts, is inundated with incoming messages, entire portfolios of venture capitalists – and the pace of incoming calls is quickening by the hour. The CEO says their inbox is as a second application portal.

And despite the idea that competitors might have a field day in the spotlight, Pham is cautious, saying Series only includes “certain startups” while other startups may be too risk-tolerant with the compliance to speed up onboarding processes.

“If (you’re a) YC-backed neobank and you want to acquire all the startup customers, now is the day to do it,” Pham told TechCrunch. (YC CEO Garry Tan told YC Enterprises, according to an internal screenshot seen by TechCrunch, that “whenever you hear of credit issues at a bank, and it can be deemed credible, you need to take it seriously and put the interests of your startup first by not exposing yourself to more than $250,000 in exposure this year.”)

“The problem is, it’s the easiest way to invite fraud and get kicked out of banking ecosystems — there’s actually nothing stopping banks from onboarding people in five minutes,” though the founder thinks that it should take four to five days to do proper due diligence. . The startup, which was originally slated to launch publicly in the third quarter, has done more onboarding in the past day than in the past month.

“As someone who works in fintech, SVB will be fine. It’s SVB…In fact, I fully believe they’re fine,” Pham said. “It’s in your interest to just branch out and create redundancy with your banking partners and having multiple banking relationships.” Still, Pham says account requests have increased more than 10x in the past 24 hours alone. “Today’s volume is also close to double that of yesterday, since we are now seeing FRB migrations,” Pham said.

All competitors hope they are not just a place for startups to park idle cash, but also become a primary bank and help integrate payroll and recurring payments. While some are cautious, others are aggressive.

YC-backed Arc CEO and co-founder Don Muir said “it’s a COVID moment for financial services” as demand for digital banking accelerates.

“This is a time when suddenly startup founders, CEOs, operators are scratching their heads and saying wait a minute, maybe my bank deposits aren’t as safe as I thought with a traditional bank. “Muir said. “Perhaps technology can actually provide a level of diversification to my deposit base that a traditional financial institution simply cannot compete with.”

Arc helps software and API companies deploy repositories “with the click of a button…it’s something that takes offline banks weeks or even months,” Muir said. The fintech started by offering upfront money for recurring revenue, but has since evolved to offer digital banking services as well. Arc says it has received a ton of inbound since the news broke on Thursday.

“We’ve had a huge surge of tech companies at all stages — from seed to D-series — moving to Arc over the past 24 hours,” Muir told TechCrunch. In direct response to the SVB news, Arc saw its backlog of deposits “more than double” to the tune of hundreds of millions of dollars, he said.

“All of this is going live today and Monday as wire transfers are processed,” he said, noting the caliber of startups coming into their stack. Naturally, Muir argues that since most fintechs such as Arc aren’t true banks, they can actually serve as a haven for businesses and provide a more diverse banking experience. “We can take all the excess cash that is not FDIC insured and distribute it among other financial institutions, SIP insured funds and directly into government securities,” he said. declared.

And Mercury, a fintech company that has focused on offering banking services to startups since 2019, also says it has garnered a lot of interest.

Co-founder and CEO Immad Akhund told TechCrunch that Thursday and Friday “definitely were busy days” and that the company is “focused on onboarding customers quickly and giving them the best customer experience.”

Last year, the company began offering venture capital debt in a direct move to Silicon Valley Bank. At the time, it had 60,000 businesses on its platform. Like many fintech startups, Mercury — which isn’t a bank itself but a banking platform that offers FDIC-insured products through Choice and an Arkansas-based bank called Evolve Bank & Trust — expressed its belief that bigger rivals like SVB are “cumbersome and don’t understand their customers’ changing expectations,” as TechCrunch’s Connie Loizos reported.

Meanwhile, Ben Verschuere, co-ffounder and chief investment officer of fintech Treasure, said his company has “seen a large influx of deposits…to be allocated to safe securities guaranteed by the State.

“Within hours, we saw an increase of more than 25% in our assets under management and an increase of more than 20% in terms of opening new accounts,” he said. “We also saw a 500% increase on our website.” And, Stephane Lintner, CEO/co-founder of Jiko, said his startup “has seen a surge” in demand for its treasury bill offering “as companies look to secure financial instruments like treasury bills. Treasury to park cash”.

In Europe, sources claim that “many” international startups that had SVB accounts because they raised funds from US VCs reportedly transferred money to Revolut Business accounts and Wise Business accounts.

Brex, for its part, is fast-tracking founders who want to set up bank accounts in their company, worth $12.3 billion. On Thursday night, a founder tweeted that Brex had emailed users saying its business was unaffected by “current banking volatility.” Brex reportedly received billions in deposits from SVB customers overnight. Those looking to switch banks should also contact VIP Support.

The big question is whether founders leaving SVB want to trust a tech startup or a neobank with their precious capital just hours after fearing for its stability.

Jeff Richards, a venture capitalist at GGV Capital, wrote on Twitter that he was “surprised by the messages ‘move your money from a bank to a fintech startup’, but I guess we’re in a phase of financial Darwinism”. He added in a later thread, “I personally wouldn’t recommend having corporate money with a non-public company. I’ll leave it at that,” to which one investor said, “cautious.”

Richards’ view is different from some other VCs, who replicate their holding companies at other banks — some of which have a vested interest. Peter Thiel’s Founders Fund has told portfolio companies to leave SVB, Bloomberg reported yesterday. . The same fund is invested in Treasure Financial, which sources said saw a request for around $50 million within an hour of SVB reporting.

If you have a juicy tip or a lead on happenings in the risk world, you can contact Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. You can contact Mary Ann Azevedo on Twitter @bayareawriter or on Signal at +1 408.204.3036. Requests for anonymity will be respected.


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