Mercury: the unbundling of Silicon Valley Bank

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Mercury San Francisco, CA

Mercury is a B2B neobank targeted at startups.

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#fintech

#neobank

Jan-Erik Asplund

Published Mar 16th, 2023

TL;DR: As Silicon Valley Bank collapsed last week, $3B+ in funds flowed through the startup ecosystem to other startups, particularly neobanks Mercury and Brex. This catalyzing event gives Mercury the opportunity to aggregate startup demand, build the Booking.com of startup banking and create a new gathering place for technology startups and capital. For more on Mercury’s strategy to build for safety and engagement, check out our interview with Immad Akhund, CEO at Mercury.

Key points from our research:

Silicon Valley Bank (SVB) was founded in 1983 to serve an unattractive segment of commercial banking, companies with zero revenue but large deposits—otherwise known as venture-backed startups. Over 40 years, SVB accumulated more than $200B in total assets across the startup/VC ecosystem, with Valley institutions like Sequoia, Kleiner Perkins, and Stanford Research Park serving as feeders. (link)
SVB’s growth left it vulnerable to bottom-up disruption from Mercury and Brex (both founded in 2017), which offered bank accounts and corporate cards to underserved startups outside the core Silicon Valley clique (e.g., international startups). Similar to consumer neobanks like Chime ($1.85B revenue in 2022), Mercury and Brex launched as UI layers on top of infrastructure products like Marqeta (Brex credit cards), Synapse (Mercury banking) and Lithic (Mercury IO credit card), substituting easy-to-use digital products in place of people-driven services and verticalized to best serve a specific customer segment. (link)
SVB got unbundled during COVID and then unwound completely in 48 hours, with Mercury and Brex initially emerging as the primary beneficiaries, with Mercury adding $2B+ in deposits and thousands of customers in a week. Speed and safety drove companies to Mercury and Brex, which as neobanks, are both designed to absorb depositors at scale and diversify funds across multiple partner banks for FDIC coverage ($3M and $2.25M respectively) and money market funds. (link)