Mercury has attracted over $2 billion in deposits since SVB fell. Now its CEO is trying to convince startups to stick around

That’s what Immad Akhund, CEO of Mercury, argues. He founded Mercury six years ago with the goal of making banking more user-friendly for startups. Akhund said he considered Mercury’s rival to be SVB, but up until March, it certainly was not a fair fight. While SVB had about $175 billion in deposits before its bank run, Mercury had about 100,000 customers and was a far lower profile entity compared to the forty-year-old SVB. 

But that all changed quickly. In the weeks since SVB crashed, former SVB clients and jumpy depositors across Silicon Valley have been dispersing in search of a new banking home. Digital banks like Mercury, Brex, and Arc have seen a huge influx of customers, with Mercury seeing the highest deposit rush at over $2 billion in the weeks since SVB fell. Brex, which offers a business banking account, said it added 3,000 new customers in the week after SVB collapsed. “We’re still getting an elevated amount of signups and deposits every week,” Akhund explained.

Mercury’s client base consists largely of early-stage startups that historically have not been serviced well by big banks like JPMorgan Chase. “Big banks just don’t really understand that the needs [of early-stage startups] are unique and a little weird,” Akhund explained. Another group he’s targeting are emerging managers, who are newer partners with smaller fund sizes who also were served well by SVB and First Republic but are wary of service at bigger banks. To woo them, Immad explained that they’re doing a range of services to make their user experience easier. For example, Mercury is allowing VCs to have one email address attached to multiple organizations, a small adjustment that will help avoid a common hassle, according to Akhund. 

Yet getting deposits and keeping them are two different things, especially when startups, VCs, and retail customers are in a flight to safety across the board. To keep their influx of customers and stand out from the crowd, Mercury raised their FDIC insurance ceiling up to $5 million up from $1 million before SVB collapsed. 

How? Mercury is not a chartered bank, and therefore can’t lend against deposits. To operate like a bank, they partner with regional bank networks and hold deposits there. Mercury’s two main bank partners are North Dakota-based Choice Bank and Tennessee-based Evolve. Both of these banks have a network of regional banks in its network, so they can spread out a customer’s $5 million across multiple accounts that are each under the $250,000 FDIC insurance threshold.

“When you think about the future of serving a startup and getting safety for uninsured deposits, the only way they get that is either they go to a big bank that’s ‘too big to fail,’ or they go to somewhere like Mercury where they can get a larger set of FDIC insurance,” Akhund explained. 

Even while regional banks are the exact lenders that have been facing instability in recent weeks, Akhund still sees their strategy as fail-proof because their deposits largely stay in FDIC-insured accounts. He says that the amount of uninsured deposits across Mercury is “relatively small.” 

Yet not everyone is sure that Mercury will be able to keep its depositors happy long term. “Mercury is basically building a bank on a lot of third-party rails,” said fintech investor and general partner Matt Streisfeld at Oak HC/FT. “There were a bunch of deposits into Mercury and I think that’s great, but is there going to be another big slug of funds transitioning to them? I’m not sure,” he said. He explained that until their lending programs are more robust, and for some fintechs, until they’re lending at all, it’s hard to see them becoming the bank of choice for a majority of startups. “I just don’t know how sticky that’s gonna be,” he added. 

Akhund explained that Mercury started its venture debt lending business about a year ago, but isn’t yet able to meet the amount of demand. “We’re scaling it, but we’re not going to totally fill that SVB hole,” he explained. However, Akhund said he sees customers sticking around. “There was definitely a lot of flux at first and people were concerned about what is safe after SVB fell, but I would say recently, after that first week, our response with the increased FDIC made people feel really good about where we were positioned,” Akhund explained. 

For Akhund, he doesn’t see other fintechs as competition. “Strangely, we’re in a very uncompetitive space, and that’s the weird thing for people to see,” he explained. “You know, SVB was our main competitor.” 

Until next time,

Lucy Brewster
Email: [email protected]
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VENTURE DEALS

- Petal, a New York-based credit card fintech company, raised $35 million in funding. ValarVentures led the round and was joined by Synchrony, Samsung Next, Story Ventures, CoreInnovation Capital, RiverPark Ventures, and others.

- Salsa, a San Francisco-based payroll infrastructure platform, raised $10 million in funding. Greycroft, Better Tomorrow Ventures, and Definition co-led the round and were joined by Cambrian’s Rex Salisbury, and Forum Ventures.

- Sensydia, a Los Angeles-based noninvasive cardiac assessment company, raised $7.7 million in funding. Orlando Health Ventures led the round and was joined by Colle Capital, Frontier Venture Capital, and others. 

- Stella, a Chicago-based post traumatic stress, anxiety, stress, depression, traumatic brain injury, and Long COVID treatment platform, raised $7 million in funding from Sterling Partners. 

- Mother Science, a Los Angeles-based skincare brand, raised $6.2 million in seed funding led by Female Founders Fund.

- AudiencePlus, a Scottsdale, Ariz.-based media software company for B2B brands, raised $5.4 million in seed funding. Emergence Capital led the round and was joined by ForumVentures, Worklife Ventures, and GTMfund.

- Orby AI, a Sunnyvale, Calif.-based work automation platform, raised $4.5 million in seed funding. Pear VC and New Enterprise Associates co-led the round and were joined by WingVC. 

- Zamp, a New York-based managed sales tax solution platform for online sellers, raised $4 million in funding. Valor Equity Partners, Soma Capital, Day One Ventures, and others invested in the round. 

- AvantGuard, an Ithaca, N.Y.-based antimicrobial company, raised $2.85 million in funding. Blue Ledge Capital, SOSV, LaunchNY, and Red Bear Angels invested in the round. 

- Overplay, a New York-based user-generated gaming platform, raised $1.2 million in funding from retail investors via Wefunder. 

PRIVATE EQUITY

- A consortium backed by Elliott Investment Management agreed to acquire Syneos Health, a Morrisville, N.C.-based drug research services company, for about $4.4 billion. 

- Argonaut Private Equity acquired Center Rock, a Berlin, Pa.-based drilling tools and rigs provider. Financial terms were not disclosed. 

- Knox Capital acquired GODeeds, a Clarence, N.Y.-based attorney-prepared documents provider. Financial terms were not disclosed.

- Probo Medical, backed by Avista Capital, acquired National Ultrasound, a Duluth, Ga.-based medical imaging equipment company. Financial terms were not disclosed.

- Right Time Group of Companies, backed by Gryphon Investors, acquired ThomsonIndustries, a Port Coquitlam, Canada-based heating, cooling, electrical, and air quality services provider. Financial terms were not disclosed.

- Salt Creek Capital acquired Lewis Brass & Copper Holding Company, a Middle Village, N.Y.-based tubing and alloy distribution company. Financial terms were not disclosed. 

- Wealth Enhancement Group acquired Infinity Wealth Alliance, an Apple Valley, Minn.-based investment advisor. Financial terms were not disclosed.

OTHER

- Orphan Biovitrum agreed to acquire CTI BioPharma, a Seattle-based blood-related cancer therapies developer. The deal is valued at $1.7 billion.

FUNDS + FUNDS OF FUNDS

- One Equity Partners, a New York-based private equity firm, raised $1 billion for a fund that supports two of its portfolio companies, USCO and DWK Life Sciences. 

PEOPLE

- Atlassian, a Sydney, Australia-based software company, hired Peter Lenke as head of Atlassian Ventures. Formerly, he was with Twitter.

- B Capital, a Los Angeles-based investment firm, hired Don Wood as a venture partner. Formerly, he was with DFJ. 

- CoVenture, a Miami-based alternative asset management firm, hired Dalia Bauman as a vice president. Formerly, she was with The Carlyle Group.

- Godspeed Capital, a Palm Beach, Fla.- and Washington, D.C.-based private equity firm, hired Cameron Terry as principal and promoted Ahmed Abdel-Saheb to partner. Formerly, Terry was with Regions Bank.

- Jacmel Growth Partners, a Brooklyn-based investment firm, appointed Mark Hardaway as CFO.

- Theory Ventures, a Portola Valley, Calif.-based venture capital firm, hired Lauren DeMeuse as partner and COO. Formerly, she was with 8VC.