My startup banking story - https://news.ycombinator.com/item?id=35157959 - March 2023 (257 comments)
My California based credit union doesn't even offer business accounts. And using the co-op network to do in-branch business at other credit unions is not as easy as the marketing lead me to believe, so I had to get a local credit union account where I moved as well. My Washington credit union does do business accounts, so that's a nice option if I need one. Plus, it's fun being a member of two aerospace/defense employee credit unions when I only worked in tech :P
On the contrary, a highly concentrated bank might be better, everyone is on the same building, there are no encapsulated branches, you get assigned a banker that is the best fit, rather than the one who was born closest to you.
Let's say that a friend of mine has a startup funded account at Chase, and where should they go?
Silicon Valley Bank... oh wait. In all seriousness, the approachability and flexibility of SVB bankers was really unparalleled at the time. Not like Alex in this story, that made really half-baked attempts to engage with a client model he was entirely unfamiliar with (but got all the credit for). This being said, Silicon Valley Bank, a division of First Citizens Bank continues to exist.
I see a lot of Fintech players on the scene now. Brex, Mercury and Rho are common ones, through Brex has taken steps to distance itself from true, seed-stage startups as of late. Given what happened with Synapse's failure [1], I have doubts that they have the same protections and regulations of a brick and mortar FDIC bank.
Diversification is key too - so having multiple accounts. Some non-fintech banks I've seen floating around, ironically, JP Morgan Startup Banking, Wells Fargo Technology Banking Group, Citigroup Commercial Bank, PNC Technology Finance. All big banks, just not their retail banking divisions (as the author was experienced using).
[1] https://en.wikipedia.org/wiki/Synapse_Financial_Technologies
My company had an exit, I did well financially. This is not a secret. I'm extremely privileged and thankful for it. But as a result of this, I've used a private bank (or mix) for a number of years to store the vast majority of my financial assets (over 99.99% of all assets, I just did the math). An unfortunate property of private banks is they make it hard to do retail-like banking behaviors: depositing a quick check, pulling cash from an ATM, but ironically most importantly Zelle.
As such, I've kept my Chase personal accounts and use them as my retail bank: there are Chase branches everywhere, its easy to get to an ATM, and they give me easy access to Zelle! I didn't choose Chase specifically, I've just always used Chase for personal banking since I was in high school so I just kept using them for this.
Anyways, I tend to use my Chase account to pay a bunch of bills, just because it's more convenient (Zelle!). I have 3 active home construction projects, plus pay my CC, plus pretty much all other typical expenses (utilities, car payments, insurance, etc.). But I float the money in/out of the account as necessary to cover these. We do accounting of all these expenses at the private bank side, so its all tracked, but it settles within the last 24-48 hours via Chase.
Otherwise, I keep my Chase balance no more than a few thousand dollars.
This really wigs out automated systems at Chase. I get phone calls all the time (like, literally multiple times per week) saying "we noticed a large transfer into your account, we can help!" And I cheekily respond "refresh, it's back to zero!" And they're just confused. To be fair, I've explained the situation in detail to multiple people multiple times but it isn't clicking, so they keep calling me.
I now ignore the phone calls. Hope I don't regret that later lol.
Which one(s)?
In 2022 I lost my business banking and had to shut down a business that I owned for 20 years because it was related to the adult entertainment industry and, despite being completely legal and aboveboard, a single wire transfer that got a little bit of scrutiny resulted in them asking questions about what we did and, knowing that I was doing absolutely nothing wrong, I answered all of their questions truthfully and completely. A few months later I was told that we "fell outside of their risk appetite", our accounts were being closed... and for two months we searched for any bank or credit union in Canada but none would take us.
A lot of industry insiders had that exact reaction: "Are you stupid? Did you not know?! You NEVER admit that you're in this industry you moron!" etc. We even had a very sympathetic branch manager suggest that we re-incorporate, re-brand and hide what we do (a front, in other words). I couldn't do that. And I mean, we had no issues for 20 years. 10 of which were banking as a corporation (was personal accounts before that since we ran it as a proprietorship) and I thought that being in Canada we were pretty progressive. No one I told on a personal or professional level had ever cared. So why would the banks? We were lawful so why should they care?
The industry is rife with this kind of fraud, and chargebacks represent tangible risk of financial loss, so banks just blanket ban working with certain industries.
People who sell precious metal jewelry for credit card payments are another.
source: used to run porn websites back in the early 00s.
What I think it was:
1: Chase's business account wasn't appropriate for a tech startup; nor was it appropriate for the amount of money Mitchell was handling.
2: When your bank calls you after a very, very large money transfer, you should take the call.
That being said: In today's world where every other phone call is some telemarketer trying to scam you or otherwise sell you something you don't want or need, I can sympathize with why Mitchell blew off the first call.
>1: Chase's business account wasn't appropriate for a tech startup; nor was it appropriate for the amount of money Mitchell was handling.
What properties make it inappropriate for a tech startup, specifically? What would be appropriate instead, and why?
>2: When your bank calls you after a very, very large money transfer, you should take the call.
He did take the call, but I take your answer to mean that Mitchell and Alex didn't have the right kind of conversation on the call. Is that correct? If so, what ought to occur on a call that follows a large transfer?
I would echo this question. If my bank called me and asked if I needed help, why would I say yes? I got money, the bank is holding it, everything is going great! This really feels like Alex was trying to ingratiate himself with a big client but communicated that really poorly, such that the message of "you are a big deal so I want to give you top tier service" never came across.
Until your account is many orders of magnitude larger than the other accounts. I suspect the typical "business" account was well under a million. See https://news.ycombinator.com/item?id=45058480 to understand why this was a big deal for the bank.
But again, Alex would not have been able to do this because Chase might not have had any policy about how to redirect customers to the appropriate type of banker. Which is kind of stupid for a megabank of its size.
Mitchell didn't take the call. He ended the call as quickly as he politely could, short of hanging up on Alex.
Edit: I've had a few bank tellers advise me on how to adjust my bank account correctly in the past. I'm going to assume this is what Alex was trying to do.
I might also point out that, around this time, Wells Fargo tellers were very pushy and would make calls like this. (I got one) It later came out that they were under intense pressure to sell banking services that nobody wanted.
So there is some set of services that are useful specifically to a tech startup but not a restaurant, but then there are a category of services that "nobody" wants, neither restaurant nor startup. Do you have an examples of any of those categories?
I am not asking because I disbelieve you. I am asking because I find this all fascinating, but it seems my imagination is lacking! What would I want from a bank account as a tech startup, versus a non-tech startup, versus a restaurant, that the bank wouldn't already give me when I sign up for a normal business account?
You said you were "advised to adjust" your account. Again, I apologize if I come across as ignorant, but what kind of adjustments?
My understanding is that people with financial training don’t think about money, they think about risk. If you are a banker and ask yourself “What is the probability that this 100 deposit will be here in another 30 days?” you might answer differently depending on what you know about your customer.
- If you think that your customer will withdraw 50 in the next 30 days, you might take the other 50 and invest it in a 30-day CD, and take the other 50 and just hold on to it.
- If you think all 100 will remain in the account the entire time you could invest all 100.
- etc.
If you are the customer you want a bank that understands what kind of inflows/outflows you’ll typically have. The bank wants to manage the risk, and you want a bank that doesn’t freak out at what seem to you to be very mundane transactions.
He also didn't get any extra controls on the account - you can see from the end of the story that they just forgot about it and someone stole $100k of it!
It wasn't a specific service, it was that Wells Fargo employees had a "performance metric" (which I understand in certain postapocalyptic hellholes translates to "a threat to your livelihood and your ability to receive medical treatment if you fall ill") on the number of products each customer was using. So they would encourage customers to open extra savings accounts, credit cards etc. (or some of the more enterprising employees would skip the phone hassling stage and just open these accounts).
I visited the bank a few days earlier because they sent me a debit card that I didn't want. (I wanted to switch it to an ATM card because it's harder to commit fraud with them.)
The teller basically didn't listen to me and tried to push services on me for 15-20 minutes. Eventually he realized I was getting extremely frustrated and helped me do what I needed to do.
The call from the teller a few days later was extremely unexpected, and I was justifiably curt. I said something like, "I don't want any new banking services, there's no reason for you to call me."
A few months ago, a teller offered to move my savings account to a higher interest version. I just had to maintain a minimum balance. A similar thing happened when I had my first summer job before college: A teller offered me a higher-interest money market account, it was just limited to something like 4 withdrawals a month.
> Do you have an examples of any of those categories?
I'm not an expert in startup finance, but I'll try my best.
The mistake that Mitchell made was kind of like keeping all your liquid assets in a checking account. Imagine if, instead of investing in a 401k (or similar,) retail investments, CDs, savings accounts, ect; you just put your entire life savings in a single checking account. Not only would you sacrifice a massive amount of interest, you would probably lose FDIC protection as your account grew, you'd be at risk of someone forging checks, and you'd be at risk of debit card fraud.
Startups often talk about their "runway." This is how long the startup can pay their employees, rent, and other bills; if they have no income. Don't quote me, but this is usually something like (roughly) 2-5 years.
Now, keeping the "runway" money in a single account is kind of, to put it bluntly, dumb. (It's like if you kept all your liquid assets in a single checking account.) Most of it should go to low-risk investments, like CDs and other high-interest savings accounts. I'm sure Silicon Valley Bank has a very straightforward way (for startups) to do this, that Chase doesn't have.
> What would I want from a bank account as a tech startup, versus a non-tech startup, versus a restaurant, that the bank wouldn't already give me when I sign up for a normal business account?
Remember the term "runway." Restaurants are typically profitable from day one, or become profitable quickly. They spend roughly as much as they take in. Startups often run at a loss for many years before they become profitable.
Likewise, a restaurant might have to pay back a loan that it used to buy equipment, renovate, or purchase the business. Startups hold onto their investment as "runway" instead of paying back a loan.
I'm going to assume that Silicon Valley Bank has products built around the fact that a startup has a large sum of money that it spends very slowly, versus a restaurant that needs loans and spends money as quickly as it comes in.
That's what SVB assumed, and they were very wrong.[1]
[1] https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Ban...
It is a bit weird how actively the guy tried to engage but it probably is just because it was one of the largest accounts opened through that branch - if they'd opened an account with the same bank but a branch in down-town SF instead of in the suburbs of LA then they would have had an account manager more accustomed to that kind of business and it presumably wouldn't have been as weird...
https://news.ycombinator.com/item?id=45058480
> If you are the customer you want a bank that understands what kind of inflows/outflows you’ll typically have. The bank wants to manage the risk, and you want a bank that doesn’t freak out at what seem to you to be very mundane transactions.
https://news.ycombinator.com/item?id=45058894
> A bank account is only insured up to $250k by the FDIC.
Your whole arrangement of having an operating account separate from your wealth accounts is highly regular.
Edit - sorry realized I replied to a reply! Put air quotes on You/Your
More likely, the bank will put a ~$1b hold on your account while they investigate suspicious transactions, and your options are to whistle, sing, scream, or twiddle your thumbs until they are done.
So having 4-5 total accounts, ideally unrelated to each other in terms of legal owners (differently-named subsidiaries are usually the way to go, I understand, though I am far from an expert in such matters), will enable you to continue to operate your business while bank A does compliance on your accounts.
If you run into a situation where banks A through F all put holds on your account, you need a good RICO lawyer or equivalent. Different class of problem, and different likelihood of happening, and the kind of thing a great CFO plans around.
>Someone out there is probably mentally screaming at me "you fool!" at this point. With hindsight, I agree...
I was hoping the piece would end with what you would do now (or what should you have done) when Alex called you. Did I fail to understand something in the piece, and simply staying on the phone with Alex would have somehow avoided the fraud situation down the line? It doesn't seem so?
If I were to get such a call, today, my instincts would be to engage in the same "I'm fine" get-off-the-phone-fast actions. What is the alternative?
What the bank is probably mainly trying to do is not "extract a higher margin" from you, but rather to "maintain your business." While Alex might not have recognized that a startup that took in a bunch of financing and plopped it into a cash account and then didn't do much with it is a customer who might disappear at any time, on some institutional level the bank is aware of it. They want you to regard them not as an interchangeable place that money sits, but as a valued partner who helps you do things with your money, and as a result you feel like it would both be a risk and a bother to extract all your money and go to some other bank.
If banks want to keep a customer, you might think the most important thing is to just not annoy or screw over their customers.
Why do they continually treat good customers like shit? I'm in New Zealand and my bank just continuously pisses me off. I don't want any upsell (the arseholes tried to upsell insurance when I got a credit card the other day). I've got a six figure facility at risk (US:HELOC?) and my bank's security practices are shockingly bad (we're way too trusting in New Zealand). Little things like access blocked from oversees for a month (phone banking was theoretically available but I couldn't call international so it wasn't). Aside: I would like to block phone banking because it feels so insecure. I've been looking for a better bank, but I wouldn't get the same mortgage facility, soooooooo I'm kinda stuck (maybe that's the reason they don't need to be good to customers).
Mitchell kept getting annoyed by the bank's activities. They wanted him as a customer but their internal systems didn't know how to make it easy for him. Systems with negative impacts are too common even when you're the guy making them money...
I'm sure Schwab would rather me have my money in a mutual fund than have a bunch of cash, for the reasons the other commenter pointed out (more complex arrangements and a view of the bank as a partner rather than an interchangeable "money box" is 'stickier') but this was a real double win for me and one of the handful of stories I call upon when I am asked why I do most of my financial business with that company.
(Better than fine, in fact, in that they refund your ATM fees.)
I basically never want to talk to anyone at any bank, like any other utility.
I think Chase starts “Private Client” at $250 or $300k. (Don’t use Chase, however.)
It might in some cases be more trouble than it is worth, if you are right around the threshold. A “normal” retail checking account and a brokerage account at another institution with the ability to transfer between them is probably sufficient for most. If you need loans or mortgages or other stuff, it might be worth the hassle (and phone calls).
(Not trying to diminish private client services. But they’re night and day different services.)
That sounds high to me. Maybe American banks? The smaller Swiss banks will start taking your calls at about $2m.
The non retail banks that have a good reputation are even higher.
They don’t outwardly advertise their minimums because “it depends.” For example if you’re an up and comer in your field where it seems like you’re LIKELY to one day hit the mins, they’ll start the relationship early.
Seriously though, just wander into any big ass bank(Chase, BOA, etc) and ask them. They have multiple tiers of private banking, depending on your wealth level. Generally the bottom tiers start around $100k and go from there. To get into the fancy tiers you generally need $1M or more of bank assets. To get into family offices, you generally need $100M or so. Though shared family offices are sometimes available at the low 30-50M range.
Just be very careful of fees. Generally the larger the private client services, the higher the fees.
every time i have to interact financially with americans its always focused around these random transfer apps like zelle, cash, venmo etc.
You create a startup -> Do you need to do anything special with regard to the bank you chose?
(Also close the account. No bank should lose money like that.)
You might also try some other governmental bodies but I've read a lot of success with the CFPB
I closed my account and have never directly used PayPal since.
I wonder why the investors didn't at least do some due diligence into where the money was being stored?
especially when you're talking about Silicon Valley Bank, ironically.
My understanding of banks is much like his naive version. So what's the more enlightened understanding?
When you're big enough for that to be a problem, like in the story, then someone who knows more that you've hired will have a stronger opinion of that.
1- KYC, the bank is a highly regulated entity, regulated by the state, they are a branch of the executive, they enforce banking laws set by the legislative, and can get involved in cases of fraud, money laundering, or other illegal activities. If they see a million dollar transaction, they usually want to know where the money came from, if they don't they would essentially be looking the other way. In general know what your business partner needs, in any walk of business. Let them know that you have a such and such business, that you got a round of funding. Also know what kind of bad actors you want to differentiate yourself from, let them know you are not a drug dealer, you are not laundering money, or running a ponzi scheme, and that the money won't be frozen putting them in trouble.
2) Money is a very complex subject, the fact that you think of money as "something that is stored in a bank" is testament to the fact that banks do a good job, it's an illusion, there's a lot going on behind the scenes that you are unaware of, similar to how there's a lot going on behind the scenes in Google or ChatGPT, which have simple interfaces but complex inner workings.
3) In general, a bank is a vendor, a supplier a business partner, you pay them for services. Maybe in your personal life you don't care and you are used to anonymous transactions because of the low amounts. But in business, these are strategic relationships, you want to get the most out of your money and establish a relationship with your vendor. Loyalty goes a long way, although switching vendors is always possible, it's a tradeoff with consequences that needs to be considered, and not ignored.
I would caution against maling this sort of comparison to tech companies. Speaking from personal experience, my vantage point is limited to Denmark, but banking isn't complicated like tech is. In tech the complications are all self inflicted, all serve to make the product. Banking interacts directly with the foundation of society. Most of the complication of banking is therefore not in service of the product, but in service of democracy.
That distinction affects the mentality and the "feel" of the complications a lot.
We sold our company in 2020. Anticipating the wire I decided I needed to upgrade to a big boy bank from my small regional bank that I've been using since I was 16.
What finer institution is there than J.P. Morgan Chase? I opened an account with them. I called them telling them there was going to be a larger than average transfer. I put in $500 to "warm up" the account (stupid in retrospect).
Acquisition goes through. Champagne for everyone. I try to login to look at the funds and my account has been closed. I call Chase and ask them "wtf?"
They say there's been fraud in the account. We've closed it. We will mail the check to your address. So I'm thinking they're going to mail me my acquisition funds over check?? FML. 24 agonizing hours and 10 calls to them later (all leading nowhere), I eventually got the funds to be wired to my original regional bank lmao. No thanks to Chase, this was all because of PNC who was in charge of the acquisition.
This is probably my fault for using a new account like this (I think someone told me to use a large bank or something I don't remember), but I will forever hold a grudge against Chase.
P.S. I never got back my $500 that they stole from me
Seems like it could have been way shorter, the plot is essentially "Deposited more and more money into a local Chase branch, made some guy named Alex a rising star. They called once in awhile, not sure why. Moving lots of money around isn't super straightforward."
So a software guy who didn't understand people or banking opens an account at Chase. And a guy from Chase who didn't understand people or software calls him-- repeatedly over years-- and fails to ever connect on any human level whatsoever. Now when first guy withdraws millions from Chase, he unwittingly causes the second guy to lose his job. This means the the second guy isn't around to help the first guy when he needs him the most-- to help him navigate banking fraud on that same account.
This just seems tragic. Second guy's success as a banker and first guy's ease of mind as a customer were inextricably linked. Yet neither of them knew how to form the simple social bond of two 4 year-olds playing in the same sandbox.
Seriously-- how did Chase not hand the account to someone who could connect with this guy? For a multi-million dollar account this just doesn't pass the smell test.
What sealed the deal of this interpretation to me:
"He literally writes down a phone number on a piece of paper. This is all feeling so surreal."
Why would this feel so surreal? Gauging by the dates, Author was born in around 1994, phones where definitely a thing, and phone numbers more so. My interpretation is that this guy was absolutely absorbed in computers, every social interaction occured in dms, or emails or posts, or articles. Both the 'unsophisticated' act of transmitting numbers and the need to deal with a human in real time were foreign. Without going into harsher labels like autism or antisociality, I think it's definitely the type of behaviour (described as being heads down), that is necessary to be competent enough with computers to build a hypertechnical security product over the span of almost a decade.
The point of view of the banker and how he fumbled this as well is a nice touch, illustrates the advantages of throwing a bone to your business partners. I mean even if you think of it from a non social perspective, only business, this is a supplier like any other, loyalty and gifts go a long way in general. But I guess that you don't need business acumen for a startup, you can just hyperfocus on your product and have your investors worry about the rest.
https://sneak.berlin/20191119/your-money-isnt-yours/
I finally just closed all my accounts there. It feels great. Fuck Chase.
She went to the post office which is also a bank in Rome. She asked to closed her account. She was told that she needed to go to the branch where she opened her account in Florence.
We rented a car and drove to Florence.
When we arrived at the bank in Florence, the teller informed us that we would have to come back “domani” which is Italian for tomorrow because the only person who could help us was the banker who had originally opened the account for my wife when she was a student many moons ago.
We came back the next day and met the banker who immediately recognized my wife including recanting that she was an artist. He informed her that he could not close her account, she would have to speak to the Director of the bank.
We waited in line for the director of the bank but we were told it was too close to the end of the day and the bank was out of money so we’d have to come back… Domani.
Domani arrived and my wife again waited. The Director willfully ignored her for 2 hours and it wasn’t until my wife began to cry that the Director finally called her over and allowed her to close her account.
This for €2500. That was a balance that meant a lot to us at the time.
I will never forget banking in Italy.
Nothing about that story is anywhere near normal, and unless this story took place ages ago you don't even need to go to the bank physically, you can just send either a verified email (PEC) or a raccomandata (a signed post letter, you go to the post office with your document and they send the letter with you as the certified sender).
Luckily, I didn’t actually have to go in, but the process took me nearly 6 months of back and forth, multiple phone calls, multiple hand written letters. Yes, France loves hand written letters, no you cannot type it.
Every now and then I think it would be nice to return and live in France, but the thought of having to deal with French administration has vaccinated me for life.
Within the first few months, I accumulated around 40K CHF in salary that the university owed me (technically from the Swiss government, since researchers were federal employees). Eventually, the university emailed me to ask if I’d like to pick up my money in cash (Bargeld). Apparently, this wasn’t uncommon.
One day I went to the office to collect it. They asked which denomination I preferred (I assumed 20s or 100s). I asked for a mix, and they handed me several envelopes filled with 1,000 CHF notes and smaller bills. I distinctly remember carrying multiple envelopes. At one point, as I walked back to my office on top overlooking Zurich, a gust of wind blew behind me. I turned around and saw colorful 200 CHF and 1,000 CHF notes scattered along the road. I calmly walked back and picked them up.
For a few months, I paid my rent and groceries entirely in cash. The Swiss didn’t think anything of it—in fact, it was fairly common. Eventually, I was able to open an account and received a yellow two-factor authentication device that looked like an old calculator. I deposited the rest of the money and, for the remainder of my studies, used the “yellow calculator” to pay bills online by debit. https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcQhylNX...
I never did receive an official Swiss credit card which was fine. However, I did accumulate funds a Swiss 401K which is another story unto itself.
Can some finance person tell me why the author feel they did did in not smart ways and maybe made some mistakes?
This stuck out to me. I'm in the process of opening a bank account in Singapore for a newly registered company, and boy is it difficult.
Hour-long KYC interview. Details of what the business does. Anything remotely controversial could be a red flag. They want to hear about boring B2B services. They want to see evidence of customer communications or contracts, so they can see you're a legit business and not a shell company. This is very difficult for a company that hasn't started operating yet. Why would I start operating without banking? How can I show business activity before commencing operating?
By comparison, I've opened business accounts in both AU and the US without hassle.
On the other hand, Switzerland has been surprisingly very easy to get started with quickly, even though Switzerland falls in the same category. You can easily obtain a (shitty service) Postfinance account to get started, and UBS is a breeze to work with, despite being bulge-bracket - even for new companies. Or you can also opt for a cheaper Kantonalbank, which are surprisingly very open to new businesses.
supportengineer•11h ago
Here's a better idea, guys. Tell me your value proposition. How can I get access to your luxury box? Will you lend me money at ultra-low rates? How about a free toaster? Anything?