Data from 400+ startups indicates massive SVB and FRB fallout on startup banking sector

Data from 400+ startups indicates massive SVB and FRB fallout on startup banking sector

Published: 27-09-2023 11:56:00 | By: Pie Kamau | hits: 3042 | Tags:
Banking
Financial Services
Fintech
September 2023
USA

Kruze Consulting, the startup CFO consulting firm with more than 800 venture funded startup clients, has analyzed banking data from 400+ startups with more than $4 billion in deposits. The data showcases the massive shifts in the sector post SVB and FRB collapses.

Key highlights:

  • During the crisis, FRB lost more of its deposits (as a percentage) than SVB - likely due to the fast takeover of SVB (vs. the slow death of FRB) and how SVB's venture debt made its cash deposits stickier
  • JPMorgan grew its startup market share from 12% to 60%, through organic growth and the strategic acquisition of FRB - although FRB continues to lose deposits
  • Startups have diversified their banking relationships significantly; the median startup now has 2 banks vs 1 prior to the crisis, and the average amount of cash startups kept at any single bank dropped from over $6.25 million to $4 million since the crisis.
  • SVB saw average deposits drop from $8.5 million to $4 million
  • FRB saw average deposits drop from $8.8 million to $2.7 million

 

One of the biggest and most compelling shifts is the market share that JP Morgan was able to acquire during the crisis - moving from just 12% to 60% with the acquisition of FRB. While FRB continues to lose deposits, JP Morgan has positioned itself as a major player in the future of startup banking. With the acquisition of FRB, JP Morgan has touchpoints at every level of the startup ecosystem. It is very likely that during the next startup IPO boom, JP Morgan will be able to be a partner to startups from the earliest stages all the way through IPO.

Additionally, startups have shifted the way they engage with banks - with startups having at least 2 banking relationships on average. With the increases in interest rates, startups have also shifted the way they manage capital by moving cash increasingly into interest-generating accounts. In December of 2022, only about 10% of startup cash was in treasuries but as of June 2023 30% of startup cash is now earning interest in treasury accounts. Because of that shift, startups are earning 50% more in interest than they were a year ago - up from $12,000/mo in December of 2022 to $17,000/mo in June 2023.

Read the full analysis here.

www.kruzeconsulting.com