Yesterday, the L.A. Times wrote about a bank that is “part lender, part consultant, part cheerleader and part investor… a nursemaid to countless start-ups — Airbnb, Fitbit, Pinterest and TrueCar, to name some recent ones — as well as banking the venture capitalists who fund them.” Curious to learn more about this California-based innovator with a great reputation for serving software, hardware, biotech and healthcare start-ups? Read on.
Bank Director’s managing editor, Naomi Snyder, recently wrote that “banks are used to identifying, monitoring and mitigating risks, more so than they are adept at innovating. But an argument gaining increasing weight is the notion that banks really are technology companies and need to think more like a technology company.” But what if, instead of transforming one’s business model to resemble a tech firm, an institution instead acted like Silicon Valley Bank, the Santa Clara-based powerhouse that has financed scores of the highest-flying tech companies like those mentioned above.
Certainly, this standout financial institution has a knack for staying close to their customers (*take a look at their Innovation Economy Outlook 2015). So at a time when many banks are shrinking in relevance despite their important role in local economies, I thought to take a look at this “unusual for an FDIC-regulated bank.” Billed as the bank of the world’s most innovative companies and their investors, the LA Times shared that with $40.2 billion in assets, Silicon Valley Bank now has “the heft to handle them from start-up to initial public offering, multiplying its profits on larger loans and fees.” Further,
The bank, which recently opened an office in Santa Monica, is more willing than others to focus on a start-up’s growth prospects rather than its current financial condition and to lend money so businesses can expand while awaiting the next round of venture capital funding, said investor Mark Suster, a client and managing partner at Upfront Ventures in Los Angeles.
Now, this doesn’t preclude the bank from identifying a good thing that can help it to continue to push forward the future of financial services. Case-in-point, I woke up a few days ago to find, via Twitter, that Standard Treasury team joined SVB Financial’s information technology team “to help it expand the bank’s digital banking platform.” Just as I looked at Capital One’s recent fintech acquisitions in my last post (How Capital One Can Inspire Your Digital Efforts), the fact that the bank hired the team from startup company Standard Treasury to help accelerate the development of its API (application programming interface) banking services underscores the institutions drive to “enable easier collaboration, product development and integration with… clients.”
While catching up to Silicon Valley Bank — which boasts of having half of all startups in the U.S. as clients — will challenge many traditional institutions, I think it makes far more sense to look at what they have accomplished and suggest banks in markets where venture-backed start-ups are taking off try to pattern their business after SVB’s successes rather than radically shifting the underlying business model to emulate what might work for a technology company.
Of course, the LA Times does remind us that “most also don’t come close to Silicon Valley Bank’s well-connected network of outside experts, mentors, tech executives, venture capitalists and current and former clients ready to help its upstart entrepreneurs — no matter how farfetched an idea might seem.” Nevertheless, at a time when individuals along with business owners have more choices than ever before in terms of where, when and how they bank, I think leadership teams at financial institutions of all sizes should pay attention to how Silicon Valley Bank aligns its services (and product mixes) to suit core customers’ interests and expectations.