Big banks race to win AI startups after tech lender collapses

Three years after several major lenders serving technology companies collapsed, big banks are fighting hard to capture their business. The surge in artificial intelligence investments is turning up the heat on this battle.

Venture funding for AI hit an all-time high of $222 billion last year, according to PitchBook. This money has created numerous millionaires and billionaires, opening doors for banks to manage their wealth, provide financing, and advise on raising capital.

Multiple large financial firms are competing for this market. JPMorgan Chase, Citizens Financial Group, Flagstar Bank, and Stifel Financial have all jumped in. Jake Moseley, who oversees venture banking at Stifel in San Francisco, says his team works with firms raising substantial capital, particularly those where AI drives their core operations. Stifel’s venture banking deposits climbed to $7.7 billion at year-end, nearly doubling in size.

Moseley explained last month that company founders and staff often cash out portions of their holdings. “That absolutely creates a wealth management opportunity alongside it,” he said.

In early 2023, Silicon Valley Bank suddenly went under. Fear-driven withdrawals combined with rapidly climbing interest rates proved fatal. Two other banks, Signature and First Republic, also failed. Moseley and several coworkers moved to Stifel from Silicon Valley Bank right after it collapsed, joining many others who scattered to competing institutions.

San Francisco’s Bay Area has become the main battleground. The region is at the heart of the AI explosion and attracted roughly $47 billion in venture investment in 2025. New York City raised just one-fourth of that amount.

Banks build teams from failed competitors

Citizens wanted to acquire First Republic in 2023, but JPMorgan won instead. The bank still managed to hire approximately 150 people who had worked at First Republic. Chief executive Bruce Van Saun described them in December as “a huge amount of talent who know everybody in the San Francisco Bay area and the Valley.”

That hiring spree helped Citizens build its private banking and wealth division to 550 employees. Van Saun says the bank is developing financial products aimed at pre-IPO companies and individuals whose AI-related wealth exists only on paper right now.

“Eventually, when they do get liquidity, and they have broader needs, and they want to invest to get diversification, there’s a real opportunity there,” Van Saun explained. Citizens introduced specialized loan products targeting startup founders and venture capitalists late last year. The Rhode Island-headquartered bank wants to spread its private banking operation to additional cities this year, including Philadelphia.

HSBC purchased Silicon Valley Bank’s UK division, bringing roughly 700 bankers on board, and added about 40 US employees while growing its venture banking operations. JPMorgan leveraged its First Republic acquisition to pursue wealthy individuals and position itself as the top choice for startups, their creators, and venture funding sources.

JPMorgan opened financial centers for affluent customers in San Francisco and New York last October. It announced expansion and renovation plans for its San Francisco facilities in April of last year.

Integration challenges lead to staff turnover

Merging high-growth, volatile startup customers into conventional banks with strict, cautious structures has proven difficult. Employee turnover has been an issue.

Flagstar Bank acquired a significant portion of Signature in March 2023. It later added six private banking groups totaling more than 100 former First Republic employees. But Flagstar encountered problems in early 2024 requiring a $1 billion capital boost. New Jersey-based OceanFirst Financial hired away over a dozen of its private and business bankers last year. Additional departures went to rivals like Citizens. Gary Farro and Jason Birnbaum, who came from First Republic, left with others to launch Graintree Lending Partners.

Richard Raffetto oversees commercial and private banking at Flagstar. He considers this turnover part of regular operations. The bank has also recruited, including Mark Pittsey from HSBC to lead private banking and wealth last year, along with professionals from City National Bank and JPMorgan. New locations opened in Palm Beach, Florida for private customers last year and in New York City this month. A San Francisco office is scheduled for 2026.

Expanded services for wealthy tech founders

New hires enabled Flagstar to introduce products like interest-only mortgages and capital call credit facilities. Programs for partners at private equity, venture capital, and private credit firms started, along with aircraft and yacht financing. Late last year, senior HSBC executives joined for estate planning, wealth planning, and insurance services.

Flagstar’s private banking and wealth segment now manages over $20 billion in deposits and client assets with approximately 480 workers. Former First Republic bankers make up about one-third of Pittsey’s group.

Pittsey noted that before March 2023, “Hiring anyone from those three banks before March of 2023 was nearly impossible.”

The 2023 turmoil taught companies not to depend on a single financial institution. Silicon Valley Bank went down partly because tech-focused customers with uninsured deposits withdrew money faster than the bank could sell assets to cover them.

The AI surge still has room to grow. Regulatory changes will likely make venture lending easier for banks. In December, the Office of the Comptroller of the Currency eliminated guidance that limited this type of lending, which was implemented after Silicon Valley Bank collapsed.