For start-up competition, SVB’s nightmare is a win and a trip

Image credit: David Paul Morris/Bloomberg/Getty Images

Sometimes it’s not your choice to leave stealth: It’s a force function of two of your biggest competitors evaporating from business, and the third triggering customers so much that there’s talk of a bank run. At least that’s the case for Series CEO Brexton Pham, who has been building a full-stack enterprise platform for institutions and enterprises since March 2021.

With the threat of a bank run looming over Silicon Valley Bank, days after Silvergate’s meltdown and impending shutdown and Signature Bank’s ongoing step back from crypto clients, Pham has found himself in “the nuttiest week ever.” Series, which offers corporate bank accounts, is inundated with incoming messages, entire portfolios of VC firms – and the pace of inbound is increasing by the hour. The CEO says their inbox is as a second application portal.

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

“If [you’re a] YC-backed neobank and you wanted to get all the startup customers, today is the day to do it,” Pham told TechCrunch. (YC CEO Garry Tan told YC companies, according to an internal screenshot seen by TechCrunch , that “anytime you hear problems with solvency in a bank, and it can be considered credible, you should take it seriously and prioritize the interests of the startup yours by not exposing yourself to more than $250,000 in exposure this year.”)

“The problem is that it’s the easiest way to invite fraud and get kicked out of the banking ecosystems – there’s actually nothing stopping banks from onboarding people in five minutes,” although the founder believes it should take four to five days to do due diligence. The startup, which was originally scheduled to launch publicly in Q3, has done more onboarding in the last day than in the last month.

“As someone who works in fintech, SVB will do well. It’s SVB … I actually have full faith that they’re doing well,” Pham said. “It’s in your best interest to just diversify and build redundancy with your banking partners and have multiple banking relationships.” Still, Pham says applications for account openings have increased more than 10-fold in just the last 24 hours. “Today’s volume is also close to double yesterday’s as we are now seeing FRB migrations,” Pham said.

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

YC-backed startup Arc CEO and co-founder Don Muir said “this is a COVID moment for financial services,” as demand for digital banking accelerates.

“This is a time where entrepreneurs, CEOs, operators are suddenly 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. “Maybe technology can actually provide a level of diversification of my deposit base that a traditional financial institution simply cannot compete with.”

Arc helps software and API-driven companies distribute deposits “at the click of a button … it’s something that takes offline banks weeks to months to do,” Muir said. Fintech started by offering cash upfront for recurring revenue, but has since evolved to also offer digital banking services; Arc says it has received a ton of input since the news was announced on Thursday.

“We’ve had a huge wave of tech companies at all stages — from seed to Series D — moving over to Arc in the last 24 hours,” Muir told TechCrunch. In direct response to the SVB news, Arc has seen its backlog of deposits “more than double” to hundreds of millions of dollars, he said.

“Everything coming online today and Monday as wire transfers are being processed,” he said, noting the caliber of startups coming to their stack. Naturally, Muir argues that because most fintechs like Arc aren’t actual banks, they can actually serve as a safe haven for companies and provide a more diversified banking experience. “We can take any excess cash that is not FDIC insured and spread it across other financial institutions, SIP insured funds and directly into government securities,” he said.

And Mercury, a fintech company that has been focused on providing banking services to startups since 2019, also says it has received a lot of in-depth interest.

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

The company last year began offering venture debt in a direct spin on Silicon Valley Bank. At the time, it had 60,000 businesses on its platform. Like many fintech startups, Mercury — which is not a bank per se, but a banking platform that offers FDIC-insured products through Choice and an Arkansas-based bank called Evolve Bank & Trust — has been vocal about its belief that larger rivals like SVB is “heavy-handed and doesn’t understand the changing expectations of customers,” as TechCrunch’s Connie Loizos has reported.

Meanwhile, Ben Verschuere, co-fsub and chief investment officer at fintech Treasure, his company said has “seen a large influx of deposits …must be allocated to safe government securities.”

“Within hours, we’ve seen more than a 25% increase in our AUM and a more than 20% increase in new account opening,” he said. “We’ve also seen a 500% increase in our website.” And, Stephane Lintner, CEO/co-founder of Jiko, said his startup “has seen a big increase” in demand for the Treasury offering “as firms look to hedge financial instruments like T-bills to park cash.”

Founderpath, a company that aims to help B2B SaaS entrepreneurs grow their businesses without diluting ownership, said it “gets inundated with tons of founder requests.”

“Many founders have millions tied up in SVB and need $500,000 to process payroll next week,” said founder Nathan Latka. “We’re connecting short-term non-dilutive funding to many of these founders right now. No upfront payment when they want to pay us with their SVB funds – once they’re released.”

Over in Europe, sources say “many” international startups that had SVB accounts because they raised money from US VCs have allegedly moved money to Revolut Business accounts and Wise Business accounts.

Brex, for its part, is fast-tracking entrepreneurs looking to spin up bank accounts in their businesses, last valued at $12.3 billion. On Thursday night, a founder tweeted that Brex sent an email to users saying its business is not affected by “current bank volatility.” Brex allegedly received billions in deposits from SVB customers overnight. Those wishing to change banks are also asked to contact VIP support.

So on Friday, Brex said it now offers an emergency bridging credit facility for SVB customers who migrate to one of their business accounts. The company emphasized that it is not directly funding the line of credit, but that it is instead being handled by “third-party capital” working with Brex “to minimize the impact of this event on the startup ecosystem.”

Co-CEO and co-founder Henrique Dubugras told TechCrunch that there is “no cap.” The news is particularly interesting given that Brex made headlines last summer for his decision to no longer work with certain small businesses, or non-institutionally funded start-ups. While the latest move could only boost his own business, like Axios’ Dan Primack notedit can also “be a lifeline for certain companies.”

The big question going forward is whether entrepreneurs leaving SVB want to trust a tech startup or 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’s “surprised by the ‘move your money from a bank to a fintech startup’ post, but I guess we’re in a financial Darwinism phase.” He added in a later thread, “I personally wouldn’t recommend holding corporate cash with a non-public co. Would leave it at that,” to which one investor said, “justifiably.”

Richards’ perspective differs from that of some other VCs, who are pitching their portfolio companies to other banks — some of which they have only a vested interest in. Peter Thiel’s fund, Founders Fund, asked portfolio companies to leave SVB, Bloomberg reported yesterday . The same fund is invested in Treasure Financial, which according to sources saw around 50 million dollars in demand within one hour of SVB’s news.

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