Why Comerica or Silicon Valley Bank Should be your Commercial Banker - and NEVER Wells Fargo!

I was planning a post about why it doesn't make any sense for a Silicon Valley startup to bank with a main street retail outfit because, in general, these banks have no idea how to work with or support a bootstrapped or venture-backed, early stage company. In particular I was going to single out Wells Fargo because, for some reason, I see many startups banking with this particular mainstream bank rather than some of the others. Unfortunately they are useless for anything other than basic transaction processing.

I always recommend banking with Silicon Valley Bank, Comerica Bank or similar institutions which specialize in early stage, venture-backed clients and who have a vast array of services geared specifically to these kinds of companies - and people who know what they're doing and who make the effort to understand their clients' businesses and work with them at every stage, like Sunita Patel (who I think is wonderful) at Comerica. Or SVB, for example, runs frequent events for startups to meet and pitch potential investors, as well as having their own VC fund to make direct investments. Like any other relationship you need to develop it over time, but someone like Sunita at Comerica will, in my experience, help you to her fullest extent when times get tough - which is the kind of banker you need.

Unfortunately I hadn't realized until today just how bad Wells Fargo is in other areas. We recently opened a "Teen Checking Account" with Wells Fargo for our 14-year-old and received, today, our first statement. I was shocked to see a $3 monthly (MONTHLY!) service fee for this account containing the $200 my son saved up from chores and odd jobs. Check out the attached statement (full address and account number redacted) in case you think I'm making this up! Download David Smith Teen Checking Statement

Note the ironic "Let us assist you in finding the right accounts and services to help you reach your financial goals" - apparently they think my son's financial goal is to literally give them his money and never see it again. If a mutual fund bragged about a guaranteed annual return of MINUS 18% just how much money do you think they would be managing?

Here's the email I just wrote to the CEO at Wells, John Stumpf ([email protected]):

Dear Mr. Stumpf

We recently opened a Wells Fargo Teen Checking Account for our 14-year-old son. We thought it would be good for him to learn the value of saving the money earned from his chores and other activities and to start budgeting for items he's interested in buying. Seems like the right example to set, don't you think?

Imagine our surprise to open the statement of his account received today - and to find his hard-earned $200 savings hit by a "Monthly Service Fee" of $3. "Monthly", mind you. No interest credited to him, of course. So over the course of a year my son's hard-earned $200 will magically become $164. For the privilege of .... what, exactly, from Wells Fargo?

So - in fact - the message to this kid from Wells Fargo seems to be as follows:

"Hey kid, because you don't know much about money we're going to smile at you, take your money and deposit it in our big vault for your safekeeping. And then, while you're asleep, we're going to take some of it every month to pay for our CEO's corporate jet until you have none left. How about that, eh? Teach you to trust your money to a big bank, heh heh! Good luck with that college fund, by the way. Lucky for you your parents weren't suckered in to giving is that to manage as well. Yours truly, Wells Fargo Bank"

Shame, SHAME, SHAME on you!

I wasn't a supporter of the current financial reform efforts in Congress - until today. Now I am 100% for anything that hits you.

Monday morning we are closing this account and this email will be all over the internet. Not that you will care one iota ....

Oh yes, have a nice day!

Philip Smith (father of same 14 year old)

I tell you, it takes a lot to rile me up given the bizarre things I see every day in startup land. But what is tantamount to stealing a kid's pocket money really gets me going.

Relevant to this blog? I think so - because if this is the treatment a 14-year-old gets, why do you think your startup being banked by the same institution is likely to be a good thing? You should recognize that having a good banker is just as important as having a good lawyer, accountant and other advisers in all the other areas of your business. A good banker is not a commodity and if you treat him or her as such then you'll get what you deserve.

Comments

[Robert Wiles]

Did the banker who opened the account discuss the fees/minimums with you and provide you a copy of the account disclosure when you opened it with your son?

[Mark Muenchow]

Right on!

Comerica, SVB and Bridge Bank are specialists, and the right kinds of banks for early and mid-stage companies.

I have hesitated to get my kids their own accounts because the cynic in me guessed (correctly, as your story confirms)that WELLS FEEGO would provide a healthy negative return for the privilege.

Please let us know the contents of the extremely responsive reply to your email should you receive one.

[Bill Hunt]

Outrageous!