The Best Banks for Funded Startups

How to choose the right bank for your startup

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Healy Jones Startup Financial Models Expert

Healy Jones
Former VC and Startup Operating Expert,
VP of FP&A at Kruze Consulting

Venture capital backed startups have very different banking needs vs traditional small businesses. We’ve worked with hundreds of funded companies, and right now the best banks for startups are SVB, FRB, Rho and Mercury.

What to look for in a bank for your startup

A bank is a very important piece of an early-stage company’s financial infrastructure. The best startup banks need to be easy to use and financially (and technically) stable.

Founders should look for several critical things in their financial institution:

Stable and well capitalized

From a stability standpoint, financial stability is imperative because if a financial institution goes out of business it can be majorly disruptive. In the United States, most banks have FDIC insured deposit products. These usually don’t offer much yield, but the actual deposits are theoretically protected up to a certain level. However, even if a financial firm did go out of business, getting access to the cash in the accounts could be difficult for a period of time. And so it's important to pick a well capitalized institution.

Good customer service

The best banks have great account managers - founders should expect a stable relationship with an account manager who gets to know the business over time. Great phone support is also extremely important, as startups may need to wire (or receive) large amounts of cash.

Strong technical integrations

Funded startups tend to have many transactions flowing into and out of their checking account. Keeping track of all of these transactions can be next to impossible without automation. So a startup must use a provider that has simple and easy integration with the bank feeds into QuickBooks. This automation will save founders time if they do their own bookkeeping, and will save them money if they pay outsourced accountants to do the work.

A clean bank feed will include the vendor, the dollar amount and the date. Many financial institutions are using Plaid, a technology provider for automating the bank feed extraction. Plaid has become one of the big standards of data management in the banking system and was just bought by Visa for $5.3 billion.

Cash management

Unlike traditional small businesses, companies that raise VC or seed financing have cash. Strong cash management is the ability to generate interest on your deposits. Generating interest on cash is a great way to pay for an extra engineer or an extra salesperson. Given the current, low-interest rate environment, getting yield is not easy. But the best financial institutions will know how to structure deposits to generate some extra return.

However, it’s important not to take too much risk in a cash management plan. More exotic securities like auction rate securities may generate some extra interest, but create real risk to the safety of the deposit - they usually are not FDIC insured. The banks our clients have success with can often structure multiple deposit accounts; one to actually run the operations of the business, and the other to generate returns.

Venture debt

And then the final thing to look for in a great startup bank is venture debt. This is not totally necessary, as there are plenty of independent venture debt funds, but it can be a nice way to extend a startup’s runway. One item that can make bank lenders more challenging that fund lenders is certain clauses like material adverse change clauses or investor abandonment clauses, which are pretty common in bank lending.

Startup specialized banks

Small business bankers get confused by Silicon Valley startups; they don’t understand how funded companies burn cash every month. It is best to pick an institution that is specialized in startups.

For the early-stage, high growth companies, First Republic and Silicon Valley Bank, are the biggest players. We also see growing market share from two newcomers, Mercury and Rho. And companies like Brex are starting to edge toward becoming actual banks, but aren’t quite there yet.

The Best Banks for Startups

The top startup banks are:

Silicon Valley Bank

Silicon Valley Bank

Silicon Valley Bank is the market leader in technology startups for a reason. With a well-rounded product line up and seasoned relationship managers, they are often the first recommendation given by venture capitalists to their new portfolio companies.
First Republic bank

First Republic Bank

The second largest, startup focused, player in Silicon Valley, FRB offers excellent customer service and strong deposit and cash management products. Their technology integrations are stable and reliable.
Rho Business Banking

Rho

Rho is a new comer, focused on helping funded companies with their cash management and credit card needs. Rho has strong perks and a great technology / UX.
Mercury banking

Mercury

Mercury - Mercury is another new player, creating a technology forward financial institution. They have a strong feed and excellent a user interface.

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Kruze Consulting is the perfect Accounting, Finance and Tax partner for Los Angeles Startups. Kruze delivers exceptional monthly reporting and financial projections. When we need help with benefits or payroll, Kruze solves our problems. Kruze does our taxes for a fraction of what previous accountants have charged. Thank you Kruze for being a great partner.

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Being a repeat tech entrepreneur, I know how challenging it is to find the ideal CFO - not only is it often expensive to find the right one, but CFOs who combine expertise with scrappiness, market vision and perspective with detail orientation and 'roll up your sleeves' execution is near impossible for an early stage company. So I've been thrilled to work with Kruze Consulting, who not only provide all the ideal characteristics of a top-tier tech CFO, but also live and breathe entrepreneurship themselves. I've known Scott and Vanessa for many years and their deep personal integrity and strong reputation in the industry and made it an easy decision to work with them again.

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About Us

A CPA Firm Specialized in Startup Accounting & Finance

A CPA Firm Specialized in Startup Accounting & Finance

Startups are our niche, and our passion. Our clients have raised over $3.5 billion in venture capital financing. We are one of only a few outsourced accounting firms that specialize in funded early-stage companies - we only offer financial and tax services to fast growing startups in the Seed, Series A, Series B and Series C stages.

The Right Accounting Partner for Your Startup’s Next Round

The Right Accounting Partner for Your Startup’s Next Round

We know how to de-risk your startup’s next venture capital round. Our team makes sure you are ready to fly through your next VC’s accounting, HR and tax due diligence. And when you use us as your bookkeeper, we set up and keep up-to-date a due diligence folder so you can get that next round of fundraising.

A Leader in Cloud Accounting Software

A Leader in Cloud Accounting Software

Our practice is built on best of breed cloud accounting software like QuickBooks, Xero, Netsuite, Gusto, Zenefits, Expensify, Avalara, Brex iand Bill.com. Technology makes us more efficient, saving our clients money and letting us offer higher value services like FP&A modeling, 409A valuation and venture debt consulting. Startups deserve to work with CPAs using modern software.

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Trusted by Top Venture Investors

Top angel investors and VCs refer Kruze because they trust us to give the right advice. Our clients are portfolio companies of top technology and Silicon Valley investors, including Y-Combinator, Kleiner, Sequoia, Khsola, Launch, Techstars and more. With us, your books and taxes are in order when it’s time to raise another round of venture financing.

What types of startups does Kruze Consulting usually work with?

What types of startups does Kruze Consulting usually work with?

Kruze Consulting works with a variety of funded Delaware C-Corps, but the majority of our companies have secured Seed, Series A, Series B and Series C. We look to partner with our clients, going beyond the typical outsourced accounting relationship and seeking to provide a higher level advisory role. We feel honored to be a part of making the world a better place, even if it’s one debit and credit at a time.

Accounting, Finance, Taxes, & Payroll all in one solution

Accounting, Finance, Taxes, & Payroll all in one solution

Startup CFO services, startup accounting and bookkeeping services, startup annual taxes, expense reports, payroll, benefits: we've got you covered. Our software provides custom tailored dashboards that can be provided weekly or monthly, depending on your preference and plan. Founders are often so busy building their company that they don’t have time to take care of their finances. Traditionally, these companies have had to work with a basket of people to get their work done, including bookkeepers, accountants, AP clerks, CFOs, consultants, and tax accountants. At Kruze Consulting, our founders have one point person, saving time and money.

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