My startup banking story

As a relatively new member of adult society, and an absolute infant of
the business world, I didn’t think much about bank choice. I figured: you
put money in, you take money out, they’re all the same. I also figured a local
branch of a global bank is just a fungible tentacle of the giant banking
machine, so also… who cares. Both incorrect assumptions, but let’s relive and
rediscover the effect of these assumptions as I did.

I start my company. I am a 22 year old recent college graduate living in San
Francisco and pursuing the startup dream. I file my incorporation paperwork
and wait to receive the necessary information for one of the first
steps of in the life of any new business: opening a bank account.

My filing is processed and I receive my EIN while visiting my parents
in a suburb of Los Angeles. I have time to kill during one of the days so
I drive down to the nearest Chase bank branch and open a business banking
account. We’ll call the person who helped me at the local branch Alex (this
will be important later). I fund that account with a $20,000 personal loan which
was almost all of my savings. I get an account number, an online login, and
boom, we’re in business!

About 6 months later, I raise a ~$1M seed round. I supply my Chase business
banking account information for the wire, and at close the funding is wired to
the account. I am sitting in a cafe in downtown San Francisco and I receive a
call from an unknown number — it’s Alex, the banker that
helped me open my account. He is being very casual, sort of like
“Hey, just wanted to check on things.” “I noticed a big deposit and wanted
to make sure you had everything you needed.” etc. For my side, I am
mostly confused: why is this person calling me? I mostly say things like
“yes yes I’m fine” and end the call quickly. Some wheels have started
turning in Southern California, and I just hadn’t known it yet.

The two years since 2012 — from a banking perspective — are quiet. Alex
doesn’t call me again, and we have no changes in our banking setup. For two years,
the company was in heads-down building mode. We had shown significant product
traction and were now ready to ramp up hiring to continue building.

At the end of 2014, we raise a $10.2M series A. I once again provide the
same Chase business banking account and when the round closes, the funds are
wired. Surprise surprise, Alex calls me! I’m starting to realize banks get
an alert when there are major changes in account balances. Regardless,
I once again brush Alex off — “everything is good thanks! bye!” — and
continue on with my life.

At this point, I am bewildered that this guy I met at the random local branch
to sign some papers is the one calling me, but didn’t think much more of
it at the time.

Once again, the two years since 2014 are mostly quiet from a banking
perspective. Alex called more regularly to “check in” but otherwise
nothing has changed. We still bank with Chase. I still have never gone
back into a branch. I do everything online.

In the fall of 2016, we raise a $24M series B. I once again provide the
same Chase business banking account and when the round closes, the funds
are wired. Again, Alex calls. Again, I brush him off. The bank is where I
plant money, I don’t need anyone calling me. I just want to focus on building
the company.

Throughout 2016, we had been building out an executive team for the company.
And around the same time of the funding, we hire a Vice President of Finance. As he gets
up to speed with our financial footing, he notices we have ~$35M sitting in
cash in a Chase bank account. This is obviously not a smart thing to do,
so he suggests some financial plans for how to better safeguard and utilize
this mountain of cash.

As part of these plans, he suggests moving to Silicon Valley Bank (SVB).
They’re local to the Bay Area, he’s worked with them before, and their
bankers understand startups. It’ll make accounts receivables, payables,
payroll, etc. easier. To me, a bank is a bank is a bank, and if it helps
make his job easier, I support his plan.

I log into the Chase online portal and initiate a wire for the full account
balance to SVB. I have to pay something like a $30 fee to wire $35M
(inconsequential to the story, but amusing nonetheless). Someone calls me for
verification — not Alex — and the wire processes. Boom, we’re done with
Chase. Or so I think.

Alex calls me the next day. The day we initiated the wire was his day off.
He sounds slightly agitated. I wasn’t rude to him, but I was short with him.
I switched banks, that’s all there is to it. Thanks and goodbye. I never
talk to Alex ever again. A bank is a bank is a bank, you put money in,
you get money out, I don’t understand why I would need to talk to someone.

We now take a brief detour from the company, because this is where my
personal life becomes relevant to the story.

For the prior three years, I had been living in Los Angeles. At some
point during 2017, I had to go to a local Chase branch to make some
changes to my personal accounts. It has been close to a year since the company
stopped using Chase.

I visit the closest bank branch to my apartment. This bank branch is 20
miles north of where my parents live — or the area with the branch where I
opened the original company business bank accounts. I’m going to Chase for
purely personal reasons, but this information is unfortunately relevant
to the story.

At my local branch, I walk up to the teller and provide some handwritten
information: my name, account number, desired transaction, etc. The teller looks at the paper,
then looks at me, then looks back at the paper, then asks “Are you the
HashiCorp guy?” What? HashiCorp is doing well but its not at all
something a random non-technical consumer would know about. What is going on?

I say yes and he acknowledges but doesn’t automatically offer any more
information. I have to know, so I continue “How do you know that?” His
response is “Dude, everyone at Chase down here knows about HashiCorp.” Huh?

The teller proceeds to explain that Alex — the guy I opened my original
company account with — became a fast rising star in the area. He had
opened a business account in a small suburb that grew from $20,000 to
$35,000,000 in balances in just four years! Despite the business (my business)
not engaging in higher-revenue activities with the bank, the opportunity
this account represented to the small business wing of the small suburbian
branch stirred up some excitement. It was just a matter of time.

And then, overnight, the account went to $0. Without talking to anyone,
without any prior warning, that account was gone. I used online banking
to transfer the entirety of the balance to another bank. The small suburban
branch viewed this as a huge loss and Alex came into work with some tough
questions and no answers. I instantly recalled feeling that Alex was agitated
when he called me the day after the transfer, and I now had an idea of why.

I don’t know what happened to Alex, the teller said he was “no longer
working in the area” and said it with a noticably negative tone. I don’t
know what this means and I never found out. Perhaps, he just moved.

Following this event, Chase began an educational series to other local
branches in the Los Angeles area explaining that there are these “startups”
and how their financial patterns do not match those of a typical business. This series
taught branches how to identify startups and how to consider their accounts.
The case study they used for this presentation: HashiCorp.

It has been two years since hiring our VP of Finance and our financial
department is in really healthy shape. I still have certain approval rights
but no longer directly manage the accounts of the company.

I’m working at my office at home in Los Angeles and I receive a phone
call from our finance department. That’s weird, I rarely receive phone calls.
They tell me that during a routine internal audit, they realized there are
a few customer accounts that are still paying their bill into the old Chase
account.

I never closed that original Chase business account back in 2016. Let
me explain how that happens. To close an account, I had to do it in person at
any local Chase branch. Startups are busy, the account balance in 2016 was $0,
and so I just put it off. Well, a couple years passed, it was still open,
and a few customers were actually sending payments to it.

Worse, upon realization that a few customer were paying into this account,
our finance team realized that there was also fraud. For over a year, someone
had been wiring thousands of dollars out every few weeks. We were short
over $100,000 due to fraud. The finance team immediately called Chase and
reported the fraud, locked down the account, and Chase started an investigation.

Meanwhile, the finance team wanted me to close the account and wire the
remaining balance to our actual business bank. With the fraud actively being
handled by Chase and the finance team, I take on the task of closing the
account. I immediately head to the nearest local Chase branch (once again
a branch I’ve never been to before) and explain the situation.

After waiting for 15 minutes, a manager walks up to me. I know this can’t
be good. The branch manager explains that due to the actions taken to lock
down the account for fraud, electronic transfers are unavailable. It doesn’t
matter that I’m provably the person who opened the account, electronic
transfers are “impossible.”

I say okay, and ask how I am supposed to close the account and transfer
the remaining balance. He said I can close the account and withdraw the
remaining balance only in cash. Cash? At this point, I literally asked:
“like, green paper money cash?” He says yes. The balance in the account is
somewhere around $1M.

I spent another two hours at the bank, juggling between calling our
finance department, talking to this branch manager, and calling the Chase
business phone line. We determine that instead of literal green cash, I
can get a cashier’s check. But there is a major problem: the amount the
cashier’s check is made out for has to be available at that local branch
(or, whichever branch issues it).
And, well, local branches I guess don’t usually have $1M cash lying around.
Or, if they do, its not enough to cover other business activities for the day
so they’re not willing to part with it.

The bank manager gives me the phone number of another branch manager that
“may be able to help me.” He literally writes down a phone number on a
piece of paper. This is all feeling so surreal. I call this number and
its for a slightly larger branch a few miles down the road. He says
“you’re the HashiCorp guy right?” And I roll my eyes. My infamy in the
area is still well known.

This manager is very helpful, if not a bit gruff. He explains to me that
each local branch has some sort of performance metric based on inflows and
outflows at the given branch. Therefore, funding a $1M cash withdrawal was
not attractive to them. I’m learning a lot in a really condensed period of
time at this point. I don’t even know if what he’s telling me is true, or
legal, all I hear is “this is going to be hard to do if you want it all at
once.”

But we do want it all at once. And we want to close the account. Now.
He is not happy, but he says he’ll call me back in 24 to 48 hours. True
to his word, he calls me back the next day. He says that he had to coordinate
to ensure his branch had the proper funding to satisfy this transaction,
and that the funding would be available at a specific date a few days hence.
He said I have to do the withdrawal that day because his branch will not
hold that amount in cash for any longer.

He also subtly suggested I hire personal security or otherwise deposit
those funds somewhere with haste. I believe his exact words were “if you
lose that check, I can’t help you.” Again, this was a one time event, and
I don’t know how true that all is, but it was said to me.

A few days later, I walk into the branch (I did not hire personal security).
I tell the teller my name and there is a flicker of immediate recognition.
The teller guides me to a cubicle, the account is successfully closed,
I’m issued a $1M cashier’s check, and I walk out the door.

My business banking relationship with Chase is, at long last, complete.

Epilogue.

The cashier’s check was uneventfully deposited into our primary business
banking account shortly after I walked out of the Chase branch.

The fraud investigation took a few months to complete but we were
able to recover all of the lost funds.

Enough time has passed and employees cycled that I’m no longer recognized at
any Los Angeles area Chase branches.

I look back on these events and there are many places I cringe. At the
same time, I can’t imagine making different choices because I was acting in
good faith at all times with the knowledge I had. I think the choices I made were
reasonable for any new founder, and I know many founders who have made
similar choices.

Ultimately, there was no long term negative impact of the events that
transpired (except maybe for Alex, but I truly don’t know) and I can now
look back on it with amusement.