When Thousand Oaks-based wirelesss network technology company Xirrus was raising funds to expand overseas, CFO Steve DeGennaro knew which bank to turn to for advice on how to finance the venture. At a time when many companies in the greater Valley region are finding it difficult to find funding, connect with venture capital groups or even find investors, Silicon Valley Bank is facilitating all three, DeGennaro and others say. The bank’s Los Angeles Regional office is located in Sherman Oaks. “Their knowledge of technology is invaluable. They understand that growth isn’t always linear,” said DeGennaro, who co-founded the company eight years ago. In those eight years, he has spent six of them in business with SVB. With $20 billion in total assets, Silicon Valley Bank does not dabble in the real estate market. It is a business bank, and a pretty particular one at that — it deals primarily in technology and wineries. Bank officials say focusing on that niche has been a key strategy that’s led to its growth. The bank’s average loan balance in the second quarter ended June 30 rose to a record high of $7.2 billion, compared to $6.8 billion in the previous quarter. That’s an increase of $432.8 million or 6.4 percent. The bank had average deposit balances of $17.4 billion for the second quarter 2012, an increase of $441.9 million or 2.6 percent, compared to the previous quarter. Consolidated net income available to common stockholders for the second quarter of 2012 was $47.6 million, or $1.06 per diluted common share, compared to $34.8 million, or $0.78 per diluted common share, for the first quarter of 2012, and $65.8 million, or $1.50 per diluted common share, for the second quarter of 2011. “We are completely leaning forward,” said Stephen Hughes, senior relationship manager at the bank’s Sherman Oaks office. “Because we focus on technology and the technology space, we have the luxury to be riding a good wave.” Tech niche According to Hughes, the niche has helped SVB to stay strong through the economic downturn and sluggish recovery. “We’re focused on an area that is really decoupled from the rest of the general economy,” he said. “A lot of other lenders are a bit gun shy, but in the technology sector we are continuing to see growth. Spending in the technology sector is continuing to increase. Because of that, we don’t have any of the battle scars of having to deal with some things other banks have had to in the last few years.” Perhaps it is because of that isolation from the storm that SVB has continued to fund technology start-ups in the San Fernando Valley, whether by loans or through venture capital firms. In 2009, at the worst of the slowing, SVB added 1,000 new clients, 400 of them borrowers, according to bank documents. “Silicon is by far the industry leader,” said Matt Crowley, president of the Los Angeles Venture Association. Crowley, an Encino-based attorney who specializes in venture capital and has shepherded many start-ups through the funding process, noted that with few exceptions, most of the big-name financial institutions don’t understand the start-up model. He said they ask for revenues and projections going back years as part of any deal. “As a venture lawyer, you hear that and you know they don’t get it. They’re a start-up, so they’re working really, really hard to lose money. They’re spending all the money they get to develop their product so that later down the line it can make money,” he said. Recently, the bank was involved in backing venture funding for uSamp, the Encino-based online market research company. For fast-growing companies like uSamp, the bank’s knowledge of the technology space is critical, Hughes said. “There are really only two or three or four other banks who have really tried to work with these types of start-ups in a meaningful way,” he said. The bank also has become a facilitator of investment and funding. It holds venture capital breakfast meetings in branches across the U.S. a few times a year when it brings companies and entrepreneurs together with investors. “In the best-case scenarios, there is a matchmaking effect,” Hughes said. The bank also is constantly on the lookout for new entrepreneurs, and a few years ago, started an Entrepreneur Services Group in several locations, including the Bay Area and New York, to aid start-up founders as they navigate their funding options. Lasting partnership Xirrus and uSamp still are in the start-up stage, but they’re both edging closer to an exit. Now the bank is moving to expand services that it hopes will persuade such clients to remain with them long into the future. “Over time, we have been building a series of services,” said Carrie Merritt, spokeswoman for SVB. “But once we got to an exit, we lost them as clients. Domestically, that’s where we’re focusing services now.” The bank has 27 offices in the U.S., locations in Europe, India, Israel and last year became the first American bank granted approval for a joint venture bank in China. “In the next few years, I would expect to see great growth internationally,” said Hughes. For DeGennaro, the international expansion is welcome news. “They are really the leading tech banker, but they needed to take that international step,” he said. Even as they try to get those services off the ground, DeGennaro says that the bank has a particular draw for funders and founders of tech companies. He has dealt with SVB in two previous start-ups, and says the bank’s model is different than others in the market. “They are very competitive,” he said. “I’ve tried to call other banks with a SVB rate sheet sitting in front of me, and I’ve had two or three say ‘Well, if that’s the rate they can give you, it’s not going to get more competitive than that.’” Plus, he added, “They speak tech. They know the industry and how it works.”
Tech Savvy Bank Gives Local Entrepreneurs a Chance
