Startups have changed deposit strategy, are earning more interest than ever before and JP Morgan has earned significant market share
SAN FRANCISCO, Sept. 26, 2023 — 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 $4BN in deposits. The data showcases the massive shifts in the sector post SVB and FRB collapses. Full details can be found on the Kruze Startup Banking page, but highlights below:
- 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.
About Kruze Consulting
Kruze provides Startup CFO Consulting to over 800+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. To date, Kruze’s clients have raised over $12 billion in venture capital and are market-leading Saas, software, eCommerce, eHealth and FinTech startups. Founded in 2012 by Vanessa Kruze, a Big Four alum, startup controller and CPA, the firm handles all things accounting, tax, finance, and HR. Everything including interim CFO Consulting, financial modeling, startup tax returns, venture debt consulting, 409A valuations, bookkeeping, AR/AP, and Seed/Series A/B Fundraising Preparation can be seamlessly handled by the professionals at Kruze. Visit https://kruzeconsulting.com/ to learn more.
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SOURCE Kruze Consulting
