In the wake of the Silicon Valley Bank collapse three years ago, JPMorgan Chase has aggressively expanded its footprint in the startup banking sector, positioning itself as a major player in a niche once dominated by West Coast lenders. The bank's efforts, led by executives like Doug Petno, co-head of JPMorgan's commercial and investment bank, have resulted in a quadrupling of startup clients to nearly 12,000, served by 550 bankers across both coasts. This push comes as JPMorgan seeks not only to capture deposits but also to deepen ties with the tech ecosystem, learning from innovative startups to enhance its own operations.
The catalyst for JPMorgan's intensified focus on startups traces back to March 9, 2023, when Petno was attending a retirement party in New York City for a colleague. His boss, JPMorgan CEO Jamie Dimon, pulled him aside during the event. "Jamie looks at me and says, 'Get on this call,'" Petno recounted in an exclusive interview with CNBC this week. On the phone were regulators inquiring whether JPMorgan had interest in acquiring Silicon Valley Bank, which was unraveling amid a massive deposit run by its startup clients.
The next day, March 10, 2023, California regulators seized SVB after it lost $42 billion in deposits over the weekend. JPMorgan leaders, including Dimon and Petno, debated over the following days whether to pursue the purchase. Ultimately, they declined, partly because SVB's fleeing clients were flocking to JPMorgan accounts in droves. "We had three years' worth of incoming clients in a weekend," Petno said. "Onboarding teams were opening up accounts around the clock."
This influx highlighted a market opportunity. Emboldened, Petno pitched the idea to JPMorgan's board: build a dedicated competitor to SVB and fintech rivals like Brex, Ramp, and Mercury, which had carved out profitable niches 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, the largest U.S. bank by assets with more than $180 billion in revenue last year, startup banking represents a strategic growth avenue beyond traditional Main Street and Wall Street services. The bank, which allocates nearly $20 billion to technology this year, views the sector as a way to stay attuned to cutting-edge developments. Petno noted that JPMorgan closely monitors Silicon Valley startups for solutions to its own challenges, from cybersecurity to quantum computing.
When a client announces AI-related layoffs, JPMorgan often dispatches bankers to investigate. "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," Petno said. This hands-on approach underscores how the bank uses startup relationships to inform its internal innovations.
JPMorgan's entry into startup banking dates to 2016, amid its westward expansion when it noticed competitors targeting tech-savvy founders. Initially, the bank focused on larger, more established startups, lacking the digital tools and specialized bankers needed for smaller, riskier ventures. Venture capital investors previously criticized JPMorgan for slow account openings and cumbersome payment resolutions that required branch visits. "They want to go to the website to open an account, and if it's more than 15 minutes, they're done," Petno explained.
Post-SVB collapse, JPMorgan acted swiftly. In the weeks that followed, it hired key talent from the failed bank, including John China, then SVB Capital President, who now co-leads JPMorgan's innovation economy business alongside Andrew Kresse. By late April 2023, the bank eyed another distressed California lender, First Republic, which also served tech clients. JPMorgan won the bid for First Republic, integrating its operations and boosting its startup capabilities.
The acquisitions and hires paid off quickly. According to JPMorgan, revenue from its startup banking doubled in 2023. The business now spans multiple divisions: founders and investors as private bank clients, startups under the commercial bank, and venture funds from First Republic's legacy. While the bank declined to disclose exact revenue figures, Petno described the startup segment's growth rate as "dramatically higher" than core lines.
Even with digital advancements, some founders still visit Chase branches to deposit large funding checks into standard accounts. JPMorgan's systems now flag these and route clients to the startup team seamlessly, Petno said. This integration has expanded the client base to nearly 12,000, supported by resources across the firm.
Competitors remain formidable. SVB, now owned by First Citizens Bank, continues in the space, alongside fintechs Mercury and Ramp, and traditional players like Stifel and Customers Bank. In January, Capital One acquired Brex for $5.15 billion, consolidating the field. JPMorgan differentiates by targeting promising startups early, much like SVB did, to offer everything from core accounts to investment banking advice as they scale.
The bank's vision is comprehensive: a one-stop shop for founders from seed rounds to IPOs and beyond, including international expansion. "Once you're onboarded, you can never outgrow JPMorgan, from unicorn all the way to a Magnificent 7," Petno said, referring to tech giants like Apple and Amazon. This long-term relationship-building aims to capture lucrative fees at every growth stage.
Broader implications for the industry are significant. The SVB crisis exposed vulnerabilities in specialized banking, prompting regulators and incumbents like JPMorgan to fill gaps. By blending its vast resources with agile digital offerings, JPMorgan is future-proofing against fintech disruption while embedding itself in the innovation economy. Petno hinted at ongoing projects to enhance digital tools, potentially leapfrogging rivals.
Looking ahead, JPMorgan's startup push could reshape competition, drawing more traditional banks into the fray. As the sector evolves with AI and global expansion, the New York-based giant's bet on tech adjacency may yield dividends, both financially and strategically. For now, the rapid client growth and revenue surge signal success in turning crisis into opportunity.
Investors and founders watching closely note that while JPMorgan has made strides, execution on digital speed and personalized service will be key to sustaining momentum against nimbler competitors.