When Silicon Valley Bank faced its collapse in March, Sam Heshmati didn’t harbor any illusions that First Republic Bank, where he had spent over a decade and contributed to the launch of their startup practice, would remain unscathed.
He vividly recalls observing the unfolding events at his former workplace, experiencing a mixture of sadness and astonishment.
“When SVB went into receivership, it was a very sad day for all of us. I had spent eight years in total there. I knew a lot of people there and just felt really, really bad,” Heshmati conveyed in an interview with TechCrunch. “Plus, SBV did a lot for the ecosystem.”
Nevertheless, Heshmati couldn’t dwell on SVB’s demise for long. In his role as First Republic’s managing director and head of venture banking at the time, he swiftly redirected his focus to help First Republic cope with a surge in demand—an uptick that coincided with the regional banking crisis that began on March 10.
At that moment, Heshmati was attending a sales conference for First Republic in San Francisco, alongside the executive management team. “I think everybody’s phones started buzzing almost simultaneously, and many of us were hearing requests like, ‘I need new accounts at First Republic’ or ‘There’s a bit of a situation, and we need a potential place to move our money,'” Heshmati recounted. “The initial response was an all-hands-on-deck approach.”
He added, “Everybody was quickly trying to figure out how to support this surge in new account openings at scale, with this level of volume coming in, without compromising compliance.”
While some individuals initially expressed excitement about the influx of “so many new accounts,” Heshmati had a deeper understanding.
“I remember walking through the lobby and seeing one particular person who had a smile on their face, thinking about the business opportunity that existed here. But I don’t think that person had ever spent any time at SVB or really understood the role they played in the ecosystem. And I remember looking at the person and saying, ‘This is not good.'”
Indeed, it took only a matter of days before First Republic itself became entangled in the contagion, transitioning from opening new accounts to grappling with its own challenges as the repercussions of Silicon Valley Bank’s fate spilled over into other banks in the sector.
Heshmati described this period as an emotional roller coaster. First Republic had been performing well year after year, with its stock on an upward trajectory. Many team members were surprised that their bank suddenly found itself in dire straits.
“While SVB’s series of events happened really quickly, on the First Republic side of the house, it took a few weeks,” he noted. “It was pretty challenging because there were moments where you looked at it and said, ‘We’re gonna get through this,’ and then there were moments when we didn’t know.”
Ultimately, First Republic also succumbed, and JPMorgan acquired it as part of the receivership. Heshmati was presented with a role at JPMorgan but declined it. In the process of deciding his next steps, he engaged with more than a dozen banks.
Heshmati ultimately accepted a position at Citizens Bank, where he is currently spearheading the establishment of the financial institution’s new venture banking practice from scratch. Citizens Bank, headquartered in Providence, Rhode Island, boasts $22 billion in assets under management (AUM) and $177.7 billion in deposits, with total assets of $223.1 billion as of June 30.
“I conducted thorough due diligence on various banks, considering factors like the strength of the balance sheet, bank size, and commitment to the startup sector,” he explained. “But Citizens ticked every single box.”
According to Heshmati, Citizens Bank appeared to be the most dedicated to building upon what First Republic had initiated.
“I wanted someone else to be genuinely enthusiastic about it and never to feel like they were accommodating me,” he expressed. “They were genuinely bullish—Citizens demonstrated that enthusiasm right from the start.”
In July, Heshmati assumed the role of head of emerging VC and innovation banking at Citizens Bank, contributing to the establishment of a new division called Citizens Private Bank, which essentially adopts First Republic’s operating model.
“Our goal is quite simple: to become the ‘go-to bank’ for the innovation sector,” he stated. “Since the events of March 10 and the downfall of SVB and First Republic, I’ve learned that many people have moved to different platforms, but they look and feel quite different from what SVB and FRB represented for so many years.”
He added, “We aim to reintroduce that level of familiarity as part of this new chapter.”
Citizens is taking it a step further by integrating cash management solutions into the practice.
“We are now in a post-crisis environment where founders and investors will view cash management differently than before. They are asking questions like, ‘Where do you keep it? How do you mitigate risk?'” Heshmati remarked. “So, we have already assembled a suite of solutions that enable companies and firms to address these concerns. We don’t want to ignore the elephant in the room; we want to provide solutions to help them feel secure.”
Citizens’ new venture banking practice is open for business, although Heshmati acknowledges that it will take some time to ramp up.
Heshmati is not the only former First Republic employee who joined Citizens. Much of his team also made the transition. In June, when Citizens unveiled its accelerated private banking growth strategy, it announced the addition of 150 new hires, including teams previously with First Republic, according to Brendan Coughlin, vice chair and head of consumer banking at Citizens.
“After the disruption in March 2023, it became clear that the market is more fragmented than ever, and founders and VCs are having a difficult time trying to identify the right long-term home,” he conveyed via email to TechCrunch. “With Sam and his team, we want to step in and fill the gap by creating the new ‘go-to’ bank for the startup and venture ecosystem.”
As part of this new division, Citizens is also establishing a West Coast office.
“Having a significant presence matters in new markets, and the ability to hire a large and incredibly talented team all at once was very appealing and became the logical next step,” Coughlin added.
Expanding into California has always been a part of Citizens’ strategic plan, according to Coughlin. These plans included its acquisition of JMP Securities in November 2021. However, in this case, the speed at which it moved was opportunistic. Similarly, Citizens has maintained a private equity practice for some time, where it collaborated with much larger funds. But with the demise of both SVB and FRB, Citizens spotted an opportunity to serve the startup and VC community.
“VC financing plays an essential role in U.S. innovation, and with the collapse of SVB and FRB, which had generally dominated the mid-tier VC space, it left a huge void,” he remarked. “It’s similar to the geography piece—a venture-focused practice was always something we considered pursuing as part of our strategic roadmap. It was a natural fit for us to not only establish this practice and innovate as a company but also support the growth of young companies.”
In addition to Citizens’ existing San Francisco office space for JMP, the bank is planning to selectively add physical locations for its new private bankers and customer-facing offices to connect the private equity and venture banking relationship with loan programs and wealth management for the GP/LP partner community.
