Inside JPMorgan Chase's push to become the startup world’s new Silicon Valley Bank

Three years ago,JPMorgan ChaseexecutiveDoug Petnowas at a New York City party celebrating a colleague's retirement when his boss,Jamie Dimon, called Petno over.

It was March 9, 2023, and the customers of a West Coast lender known for catering to startups had beenwithdrawing depositsin droves.

"Jamie looks at me and says, 'Get on this call,'" Petno told CNBC this week in an exclusive interview.

On the line were regulators with an urgent question: Was JPMorgan interested in buyingSilicon Valley Bank?

California's finance regulatorsseizedSVB the next day, completing the sudden collapse of an institution at the heart of the American startup community.

Over that weekend, Dimon, Petno and other JPMorgan leaders repeatedly weighed whether they should purchase the bank, which had just lost $42 billion in deposits.

They decided against it, in part because thousands of SVB clients were signing up for JPMorgan accounts, anyway, in a flight to safety.

"We had three years' worth of incoming clients in a weekend," said Petno, who is co-head of JPMorgan's commercial and investment bank.

"Onboarding teams were opening up accounts around the clock."
Emboldened by what they were seeing, Petno had an idea: What if JPMorgan could build a true competitor to SVB — as well as startupsBrex,RampandMercury— all of whom had carved a profitable niche serving founders and venture capital investors?

"We went to our board and said, 'there's a vacuum in the market,'" Petno told CNBC.

"At that very moment, everybody saw the opportunity."
For JPMorgan,already a giantin Main Street and Wall Street finance, winning the more specific niche of startup banking from West Coast rivals is about more than gaining deposits.

It's both a key element of thegrowth strategyfor a bank with more than $180 billion in revenue last year, and also a means to help the New York-based lender stay close to technology developments for itself.

JPMorgan, with a tech budget ofnearly $20 billionthis year, is aiming to not only serve startup clients and VC investors better, but to learn from them.

The firm keeps a close eye on Silicon Valley startups for solutions to problems the bank itself faces, from cybersecurity to quantum computing.

In fact, when a JPMorgan client announces a round of artificial intelligence-related cutbacks to jobs and expenses, the firm will often send a team of bankers to investigate how the client is doing it, said Petno.

Typically, the bankers find that implementing new AI agents is only a fraction of the reason for layoffs, while other factors like over-hiring and inefficient processes account for the rest, he said.

JPMorgan began its startup banking business in 2016 as it became aware of its tech-focused rivals during its westward expansion.

In the beginning, it only served bigger, more mature startups.

That's in part because the bank didn't yet have a digital banking solution that younger founders in particular craved, Petno said.

It also didn't have enough investment bankers at the time to target smaller, riskier startups.

For years, the view on JPMorgan from some in the VC community was that it took too long to open an account, or that resolving issues around payments involved dealing with time-consuming visits to a branch, investors told CNBC.

"They want to go to the website to open an account, and if it's more than 15 minutes, they're done," says Petno.

But in the weeks that followed the SVB collapse, Petno and his team moved quickly, hiring a few key players from SVB, includingthen-SVB Capital PresidentJohn China, who today leads JPMorgan's innovation economy business along with Andrew Kresse.

By late April of 2023, JPMorgan found itself looking at buying another wounded California-based bank.

This time, it made thewinning bidfor First Republic, which also catered to the tech community.

With fresh learnings from SVB and the banking operations of First Republic, JPMorgan doubled its revenue from startup banking in 2023, according to the company.

Despite the digital banking focus, a startup founder will still sometimes walk into a Chase branch to deposit a huge funding check into a regular account.

Now, when that happens, JPMorgan's systems immediately gets that client moved to the startup team, Petno says.

JPMorgan has now quadrupled the number of total clients it has in the business to nearly 12,000, served by 550 bankers on both coasts, according to the lender, all of whom draw resources from different parts of the company.

Founders and VC investors are clients of the private bank, while the startups are covered by the commercial bank and VC funds are separate clients in a business largely acquired from First Republic.

While JPMorgan declined to give specific revenue figures, Petno said the startup business had a "dramatically higher" growth rate than the bank's main business lines.

And yet, Petno still isn't satisfied with the firm's digital banking offerings for startups, describing a project underway that will help them leapfrog competitors.

Besides SVB, which is now owned by First Citizens Bank, and the startups Mercury and Ramp, competitors in the space includeStifelandCustomers Bank.

In January, Capital Oneacquired Brexfor $5.15 billion.

Since most startups fail, JPMorgan identifies companies that it expects to be winning bets, seeking to develop relationships with them earlier in their life cycle, like SVB did.

That way, it can provide not only core bank accounts, but lucrative investment banking advice along the way.

JPMorgan's ultimate vision is to become the one-stop shop for founders, serving all their needs, including international expansion, from the seed round to initial public offering and beyond.

"Once you're onboarded, you can never outgrow JPMorgan, from unicorn all the way to a Magnificent 7," Petno said.

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