Magazine article American Banker

In California's Silicon Valley, Banks Chip in as Venture Capitalists Too

Magazine article American Banker

In California's Silicon Valley, Banks Chip in as Venture Capitalists Too

Article excerpt

Community banks in California's Silicon Valley, the hub of emerging growth companies and venture capital, are now investing in as well as lending to start-up businesses.

These banks say venture capital investing is a natural step for them because of their close relationships with venture capital firms. The banks rely on venture capitalists for due diligence and support of start-up companies; the venture capitalists depend on banks to provide financing to help expand the businesses they invest in.

The banks "have very strong relationships with the venture capitalists," said Joseph K. Morford, an analyst with Alex. Brown & Sons."I think it's reflective of their dedication to this niche and working with these companies."

Silicon Valley Bank, Imperial Bank, and General Bank are among the lenders that have established groups to invest in venture capital.

Don Cvietusa, senior vice president and manager of the venture capital group at Silicon Valley Bank, Santa Clara, said that venture capital investing, aside from providing good returns, allows the bank to "get closer to the venture capital portfolio companies."

Silicon Valley Bank has been active in this area for about two years. Its venture capital group is not a traditional venture capital unit; it does not make direct investments in companies. Instead, it is attached to Silicon's marketing group and serves as a liaison between the bank and the venture capital community.

The group is responsible for any credit facilities, such as bridge loans and capital calls, that Silicon provides to venture capital partnerships.

It also invests in the venture capital funds managed by the partnerships, which are made through the bank's holding company, Silicon Valley Bancshares. …

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