Inside JPMorgan’s push to replace Silicon Valley Bank as the startup world’s bank

In a pivotal moment for the finance industry, JPMorgan Chase executive Doug Petno recalls a call from CEO Jamie Dimon during a retirement party on March 9, 2023. This call came as the West Coast's Silicon Valley Bank (SVB) faced a massive withdrawal of deposits, leading regulators to swiftly seize the bank. The urgency was clear: Would JPMorgan be interested in acquiring SVB? Ultimately, the decision was made to pass on the opportunity, as the bank was already witnessing a surge of new clients from SVB seeking safer banking solutions. "We had three years' worth of incoming clients in a weekend," Petno remarked, highlighting the immediate influx of new accounts. This situation sparked a new idea: Why not create a viable competitor to SVB and other startup-focused banks like Brex, Ramp, and Mercury? Recognizing a gap in the market, Petno presented this vision to JPMorgan's board. The goal was not just about increasing deposits; it represented a strategic growth initiative for a bank that generated over $180 billion in revenue last year. By positioning itself as a leader in startup banking, JPMorgan aims to remain close to technological advancements while serving the needs of emerging founders and venture capitalists. With a technology budget approaching $20 billion, JPMorgan is also keen on learning from its clients. The bank closely monitors Silicon Valley startups to find solutions for its own challenges, ranging from cybersecurity to quantum computing. Interestingly, when clients announce workforce reductions related to AI, JPMorgan's bankers investigate the underlying causes, often discovering that the layoffs stem from a mix of factors, including over-hiring rather than just technology implementation. JPMorgan's foray into startup banking began in 2016, initially targeting larger, established startups due to a lack of digital solutions for younger, riskier ventures. Historically, the bank faced criticism from the venture capital community regarding the lengthy account setup process and the cumbersome nature of resolving payment issues. Petno noted that startups prefer swift online solutions, and lengthy procedures deterred potential clients. In response to the SVB fallout, Petno and his team acted swiftly, recruiting key staff from SVB, including John China, who now leads JPMorgan's innovation economy division. By late April 2023, the bank successfully acquired First Republic, another institution serving the tech sector. With insights gained from both SVB and First Republic, JPMorgan's startup banking revenue doubled in 2023. Despite focusing on digital banking, there are still instances where startup founders visit Chase branches for significant transactions. Now, when this occurs, JPMorgan's systems ensure those clients are seamlessly transitioned to the startup banking team. The bank's client base in this sector has quadrupled, reaching nearly 12,000, supported by a dedicated team of 550 bankers. While specific revenue figures remain undisclosed, Petno indicated that the growth rate for startup banking significantly outpaces that of JPMorgan's other business lines. However, he acknowledges that there is still room for improvement in their digital offerings for startups, with ongoing projects aimed at surpassing competitors. In an industry where many startups ultimately fail, JPMorgan is focused on identifying promising ventures early in their lifecycle. By fostering relationships from initial funding stages through to IPOs, the bank aspires to be the go-to partner for founders, providing comprehensive services that encompass everything from basic banking to sophisticated investment advice. Petno encapsulated this ambition well: "Once you're onboarded, you can never outgrow JPMorgan, from unicorn all the way to a Magnificent 7."