Apparently lots of VCs and startups use SVB as their bank. Could someone explain why would startups not choose relatively safer big banks like BoA or Chase? What are the advantages of using SVB as the primary financial institution?
They appear out of thin air with no history and millions of dollars. They then constantly burn money in the tens to hundreds of thousands of dollars a month until they disappear or get injected with millions more dollars. Often, traditional banks don't know how to deal with these entities and it sets off tons of alarms in their fraud and risk management departments.
SVB and related departments know the business and financial models of startups a lot better and are more willing to help.
Because such startups tend to, when they can’t raise funds easily (=nowadays), withdraw all their cash deposits at the same time (=what’s happening at SVB), which puts it in bankrupt. So, small market, but so much variance in deposits that it’s risky.
I'm assuming a similar thing was going on with SVB vs. other large banks.
It's not like they blacklist you the moment your attempt to open an account raises an eyebrow. Show up to BofA or Chase with a copy of your contract with your VC, in addition to their check, and it would be odd for them to refuse you an account.