Silicon Valley Bank Bets on Utah

We’ve been engaged in Utah for years and have watched it grow into a vibrant technology market.

Silicon Valley Bank was founded in 1983 by Bob Medearis and Bill Biggerstaff. The two came up with the idea to create a “bank for startups” during their weekly poker game, which was attended by a group of people who would eventually become some of the biggest names in Silicon Valley.

“The mythology around Silicon Valley Bank is that it was during this poker game that the very first idea for Silicon Valley Bank was hatched, or conceived,” said Blake Baldwin, former Executive Vice President of Silicon Valley Bank. “The idea was quite simple: that the burgeoning tech and life science companies that were blooming like so many wildflowers in the valley at the time were substantially underbanked — if not unbanked.”

The idea paid off — big time. Today, SVB Financial Group has more than 1,400 employees and more than $23 billion in total assets.

Like so many great companies, Silicon Valley Bank was created to challenge the “traditional way of doing things.” In 1983, the big banks were not even remotely interested in taking a chance on startups.

“When you’ve gone through from the real estate side and been rejected by some of these big banks, you sit there and all of a sudden come into the fact that maybe there is an opportunity for a bank to be in the high technology sector,” said Medearis.

Medearis and Biggerstaff envisioned a different kind of bank. A bank that actually understood the plight of an entrepreneur.

“We decided let’s have one where we really specialize in startups, get to know them, the product and the people. We’re really lending to people,” said Biggerstaff.

In 2006, Silicon Valley Bank opened a parallel operations facility in Salt Lake City to provide support and back-operations company-wide as part of its business continuity strategy. By 2008, the bank had officially opened a locally-based relationship manager office in Salt Lake City.

“Our strategy is to have a local presence in those areas with a significant concentration of technology, life science and venture capital worldwide, and we see plenty of opportunity in Utah,” said Greg Becker, president and CEO of Silicon Valley Bank, in a statement announcing the opening of the Salt Lake City office. “We’ve been engaged in Utah for years and have watched it grow into a vibrant technology market. We’re pleased to be a part of it and look forward to increasing support for local venture funds and entrepreneurs.”

We recently had the opportunity to visit the bank’s Salt Lake City office to learn more about the type of support it can offer to local entrepreneurs.

“We bring the technology and the banking to them,” said Gary Jackson, Managing Director of Silicon Valley Bank’s Salt Lake City branch. “Our business model revolves around lending, which is what a typical bank might do. The differentiator for us is that because we have such an in-depth understanding of technology, we’re able to do things that other banks won’t do or can’t do.”

Silicon Valley Bank pioneered a lending practice commonly referred to as “venture debt,” which is something traditional banks would never even consider. For those unfamiliar, venture debt provides debt financing for VC-backed companies as a means to accelerate growth in a way that’s beneficial to shareholders. In layman’s terms, venture debt can be a good way to grab some extra capital on relatively favorable terms.

“It allows a lot of companies to extend their runway while reducing dilution to the founders,” said Jackson. “It ends up being a win for people that are raising capital on an institutional basis.”

From total assets in 1983 of $18 million, Silicon Valley Bank has come a long way. The bank now dominates the startup banking market.

“If a company has institutional venture backing, there’s a better than 50–50 chance that they’re a client of ours, or soon will be,” said Jackson.

With 34 locations worldwide, and a market share that includes half of all venture capital-backed technology companies in the United States, Silicon Valley Bank is in a unique position to evaluate the validity of a startup ecosystem. With that in mind, we asked Jackson to describe what makes Utah unique compared to other parts of the country.

“It’s hard to compete with a Silicon Valley,” said Jackson. “It’s hard to compete with a New York, and some of these other major population centers. That’s not where Utah has its advantage. Utah does have an advantage in terms of the quality of life that people can have here, which has attracted a lot of people and a lot of talent to this area.

“It’s a very favorable economic environment due to just the community. You have major research universities that are putting out incredible science, and you have a culture of boot-strapping entrepreneurs building, in particular, software companies. What makes it great is also what makes it unique.”

As it continues to increase its presence in Utah, Silicon Valley Bank hopes to help foster the state’s blossoming startup ecosystem by focusing on what makes it such a unique place to start a company.

Published 3/10/2014