BK: Silicon Valley Bank's been fairly active here in Southern California recently. What made you decide to open a Westlake Village branch, and what other areas here do you see lots of activity?
TB: We opened or first office in Southern California nine years ago due to the concentration of technology companies. Since that time we have spun-out three other offices primarily as a result of our growing account base throughout the geographic area from San Luis Obisbo to San Diego. The first Office in Irvine was near the Airport and is now located in the Irvine Spectrum, the San Diego was opened about four years ago as the first out-growth office. The West LA opened 1 1/2 years ago as our client activity growth continues north of Orange County. In May of this year we opened our Westlake Village Office to get closer (geographically) to our 40+ clients along the 101 corridor. We continue to see strong fundamental growth in a variety of technologies throughout the greater area.
BK: For the people on the list who aren't familiar with venture lending, and high tech focused banking, can you tell us what the key differences between a bank like yours and the traditional business oriented banks here in Southern California?
TB: "Traditional" commercial bank lending guidelines were developed in a regulatory environment which basically caused banks to develop check lists for lenders to operate within. These lists causes the lender to evaluate historic financial data of a company to try and determine the likelihood of a loan being repaid in the future. In the start-up and early stage side of the business cycle there is no history of financial performance and as a result it makes it difficult (if not impossible) for traditional lenders to lend into this arena. Silicon Valley Bank was organized to address this issue. The realization that putting debt into the capital structure early in a company's lifecycle greatly enhances ownership values and increases returns for investors was the geniuses that caused the bank to be established in 1983. If an entrepreneur leverages investment capital he extends the runway so that better valuations are received at the next round, the investor's IRR increases as less money is employed over a given period of time. This is a win-win.
What separates SVB from other commercial banks who play from time to time in this arena is this is primarily all we do. We have established long term relationships with the investor community that allows us to bring our clients to capital. We have tailored our services to match the needs of the start-up (our clients) rather than trying to make the client fit inside the way the bank operates (the traditional bank model). We are organized internally along five primary vertical technology markets (software, communications and on-line services, semiconductors, computers and peripherals, and life sciences). This allows us to drill-down into the technology that our clients develop by having dedicated personnel in these markets. No one else can do this as they do not have the breath or market presence. The benefit that our clients enjoy is debt structures that allow for anticipated changes in the tech cycles that occur in these separate vertical markets, and the ability to hang in there with the client when the less knowledgeable banks cannot.
BK: What kind of differences have you noticed, if any, between the types of companies you serve here in Los Angeles vs. the companies SVB serves in the bay area?
TB: The primary difference we have noticed over the nine years in Southern California vs. what we see in Northern California is the entrepreneur attitude towards venture capital. From our view there are several reasons why the acceleration of the technology market in Northern California has out-paced other markets. The one that stands out the most in So. Cal. is the bias against VC's, and the bad advice entrepreneur's have received overtime in that regard from local advisors. We see too often companies reject professional money for other sources that bring little value to the company other than the money itself. Once that money is used, the company finds itself stranded. The Northern California entrepreneur has figured this out, they understand the value of professional money and the community (not to mention the individual) is much better off today as a result.
BK: What advice would you give an aspiring high tech entrepreneur on best utilitizing the services of a bank like yours?
TB: Compare the banks you talk to. Find out their knowledge of your business and technology. Ask to see who else they bank in your sector. Talk to their clients about their experience when things didn't go as planned. Ask who and what they can bring to the table beside the money. Ask if they are set-up internally to hand hold start-up companies and if their services are designed for companies your size.