JPMorgan Chase is fully entering the startup sector, aiming to become the new benchmark following Silicon Valley Bank.

Key Highlights

• After Silicon Valley Bank’s collapse, JPMorgan Chase added a customer base in one weekend equivalent to the total of the past three years.
• Under Jamie Dimon’s leadership, the bank’s startup client base grew to nearly 12,000, a fourfold increase, with 550 dedicated bankers.
• JPMorgan’s goal is to provide founders with a one-stop financial service from seed funding to IPO and beyond.

On March 10, 2023, in Santa Clara, California, people lined up outside the closed Silicon Valley Bank headquarters.

Three years ago, JPMorgan executive Doug Petno was called aside by his boss Jamie Dimon at a retirement party in New York.

That day was March 9, 2023, when the West Coast bank known for serving startups was experiencing a large-scale deposit run.

“Jamie looked at me and said, ‘Come to this meeting,’” Petno said in an exclusive CNBC interview this week.

On the other end of the line were regulators, raising an urgent question: Was JPMorgan interested in acquiring Silicon Valley Bank?

The next day, California regulators took over Silicon Valley Bank, which was a core bank in the U.S. startup scene, collapsing suddenly. Over that weekend, Dimon, Petno, and other JPMorgan executives repeatedly debated whether to acquire the bank, which had just lost $42 billion in deposits. Ultimately, they decided against it, partly because thousands of Silicon Valley Bank customers had already rushed to open JPMorgan accounts for safety.

“We gained a customer base in just one weekend equivalent to three years,” said Petno, co-head of JPMorgan’s Commercial Banking and Investment Bank. “Our account opening teams worked around the clock.”

Inspired by this, Petno had an idea: Could JPMorgan truly become a competitor to Silicon Valley Bank and also rival fintech firms like Brex, Ramp, and Mercury that serve founders and VCs?

“We told the board that there was a vacuum in the market,” Petno told CNBC. “At that moment, everyone saw an opportunity.”

Focusing on Tech Frontiers

For JPMorgan, already a giant in retail and Wall Street finance, capturing the startup banking niche on the West Coast was not just about deposits. It was a key part of the growth strategy for a bank that earned over $180 billion last year, and also a way to stay at the forefront of technological development.

This year, JPMorgan’s tech budget is nearly $20 billion, aiming not only to better serve startup and VC clients but also to learn from them. The bank closely monitors Silicon Valley startups, seeking solutions to its own challenges, from cybersecurity to quantum computing.

Petno said that whenever JPMorgan’s clients announce layoffs or cost-cutting related to AI, the bank often sends teams to investigate their specific practices.

He noted that bankers usually find that the introduction of new AI tools is only a small part of the reason for layoffs; more often, it’s overhiring and inefficient processes.

From Follower to Leader

JPMorgan’s Co-CEOs of Commercial and Investment Banking: Troy Roebuck and Douglas Petno.

JPMorgan launched its startup banking division in 2016, initially focusing on larger, more mature startups as it expanded into the West, noticing competitors in the tech sector.

Petno said that partly because the bank at that time lacked digital banking solutions that young founders urgently needed, and didn’t have enough investment bankers to serve smaller, riskier startups.

Several investors told CNBC that over the years, some in the venture capital community felt JPMorgan’s account opening process was too slow, with payment issues requiring in-branch resolution.

“They wanted to open accounts online, and if it took more than 15 minutes, they’d give up,” Petno said.

But within weeks of Silicon Valley Bank’s collapse, Petno and his team acted swiftly, recruiting key figures from SVB, including then SVB Capital President John China. Today, he co-leads JPMorgan’s Innovation Economy division with Andrew Kresge.

By late April 2023, JPMorgan faced another opportunity to acquire a struggling California bank. This time, it successfully bought First Republic Bank, which also served the tech sector.

The bank said that, leveraging experience from SVB and First Republic, JPMorgan’s startup banking revenue doubled in early 2023.

Petno noted that despite focusing on digital banking, some startup founders still walk into JPMorgan branches to deposit large funding checks into regular accounts. When this happens, JPMorgan’s system immediately transfers the client to the startup services team.

Strategic Dominance

JPMorgan states that its startup client base has now grown to nearly 12,000, a fourfold increase, with 550 bankers across the East and West Coasts, capable of mobilizing resources from various departments.

Founders and VCs are private banking clients, startups are served by commercial banking, and VC funds are part of an independent client group acquired from First Republic.

While JPMorgan declines to disclose specific revenue figures, Petno says that startup business growth far exceeds the bank’s core operations.

However, Petno remains dissatisfied with the bank’s digital banking services for startups, saying they are working on a project to surpass competitors.

In addition to SVB (now acquired by First Citizens Bank), Mercury, and Ramp, competitors in this space include Stefi Bank and Client Bank. In January, First Capital acquired Brex for $5.15 billion.

Since most startups fail, JPMorgan filters for promising companies, establishing early-stage relationships similar to SVB, to build partnerships during their early lifecycle.

This allows the bank to not only provide core banking accounts but also offer high-margin investment banking advisory services throughout the process.

JPMorgan’s ultimate vision is to become a one-stop financial service provider for founders, covering everything from seed funding and IPOs to international expansion.

“Once you’re with JPMorgan, no matter what stage you’re at—from unicorns to ‘Big Tech’—you’ll always need JPMorgan,” Petno said.