WEBVTT - Greg Becker on the Innovation Business (Podcast) 0:00:02.040 --> 0:00:07.160 This is Mesters in Business with Very Results on Bloomberg Radio. 0:00:07.280 --> 0:00:11.600 Here this week on the podcast, I have an extra 0:00:11.680 --> 0:00:18.280 special guest. If you are at all interested in startups, entrepreneurism, lending, 0:00:18.920 --> 0:00:22.919 risk managements, venture capital, strap yourself in. This is a 0:00:22.960 --> 0:00:26.840 great one. Greg Becker. He's the CEO of Silicon Valley Bank, 0:00:27.240 --> 0:00:30.800 where he's worked since and where he served as president 0:00:30.800 --> 0:00:35.160 and CEO of SVB Financial Group and Silicon Valley Bank 0:00:35.600 --> 0:00:38.880 since two thousand and eleven. This is really a wide 0:00:38.960 --> 0:00:42.839 ranging and fascinating conversation for somebody who is right at 0:00:42.920 --> 0:00:47.879 the nexus of everything from venture capital to life sciences, 0:00:48.280 --> 0:00:53.080 to fintech, to you name it, but from the perspective 0:00:53.240 --> 0:00:57.800 of a commercial banker, really located at the bull's eye 0:00:58.080 --> 0:01:01.240 of the innovation economy, not just in the United States, 0:01:01.320 --> 0:01:04.360 but for the entire world. I found this conversation to 0:01:04.360 --> 0:01:08.479 be absolutely fascinating, and I think you will also, with 0:01:08.520 --> 0:01:12.560 no further ado, my discussion with Silicon Valley Banks CEO 0:01:12.880 --> 0:01:19.399 Greg Becker. This is Mesters in Business with Very Redholts 0:01:19.880 --> 0:01:25.920 on Bloombird Radio. My extra special guest this week is 0:01:26.000 --> 0:01:30.080 Greg Becker. He is the president and CEO of Silicon 0:01:30.240 --> 0:01:35.280 Valley Bank, where he has worked since. Since two thousand 0:01:35.319 --> 0:01:38.240 and eleven, he has been running the place both as 0:01:38.319 --> 0:01:43.400 CEO of SVB Financial Group and Silicon Valley Bank. Greg 0:01:43.480 --> 0:01:47.800 was named to Worth Magazine's Power one hundred most Influential 0:01:47.800 --> 0:01:52.840 People in Global Finance. Greg Becker, Welcome to Bloomberg. Thanks 0:01:52.920 --> 0:01:55.480 very great to be here. It's really great to have 0:01:55.560 --> 0:01:58.360 you here in doing this live in person. So when 0:01:58.400 --> 0:02:01.040 I look at Silicon Valley Bank, the question that comes 0:02:01.040 --> 0:02:04.000 into my head is is this a bank that does 0:02:04.040 --> 0:02:07.279 some venture capital or is this a VC that offers 0:02:07.320 --> 0:02:10.960 some banking services. Well, we are banking, so let's be 0:02:11.040 --> 0:02:13.919 clear about that. We're a bank that caters to a 0:02:14.040 --> 0:02:18.400 very specific industry and then does a lot of things 0:02:18.480 --> 0:02:22.280 to support those companies in those industries. So it's about 0:02:22.360 --> 0:02:25.560 innovation companies all around the world. You start with him 0:02:25.639 --> 0:02:29.120 very early. We support them with commercial banking, private banking, 0:02:29.120 --> 0:02:32.880 and investment banking and asset management, so all those things 0:02:32.880 --> 0:02:36.440 fit together to help these innovation clients. So you've been 0:02:36.520 --> 0:02:39.080 with the bank since ninety three. What was your first 0:02:39.200 --> 0:02:42.440 role there? How did you arrive at Silicon Valley Bank. Yeah, 0:02:42.440 --> 0:02:45.600 so I started out as a loan officer, so lending 0:02:45.680 --> 0:02:48.360 money to companies, and I came from another bank that 0:02:48.440 --> 0:02:52.280 worked with more traditional companies. My manager at the time 0:02:52.560 --> 0:02:56.320 was leaving to join Silicon Valley Bank and he encouraged 0:02:56.360 --> 0:02:58.960 me to join him, and I did, and it was 0:02:59.200 --> 0:03:02.200 phenomenon to an incredible, incredible career. But I started out 0:03:02.320 --> 0:03:07.720 lending money to early stage technology companies at Silicon Valley Bank. 0:03:08.840 --> 0:03:11.560 Now that sounds like a very high risk sort of 0:03:11.680 --> 0:03:14.800 loan that typical banks don't make. How do you go 0:03:14.880 --> 0:03:18.680 about vetting a loan to a company that is brand 0:03:18.680 --> 0:03:21.440 new as a startup, doesn't have a long financial history. 0:03:21.919 --> 0:03:25.560 How does that process differ than traditional bank lending. Yeah, 0:03:25.600 --> 0:03:28.000 well it's changed a lot in twenty eight years. So 0:03:28.240 --> 0:03:30.520 when you think about it, um, way back when when 0:03:30.520 --> 0:03:33.000 I first started, the loans were much smaller. There were 0:03:33.240 --> 0:03:36.040 you know, does not have many these choices for these companies. 0:03:36.280 --> 0:03:39.240 It was really lending money in a very i'll call 0:03:39.280 --> 0:03:42.600 it more conservative way than we do today. And venture capital. 0:03:42.600 --> 0:03:45.440 Those are the two ways that companies were financed. And 0:03:45.480 --> 0:03:48.120 then today, when you think about it, it's all about 0:03:48.360 --> 0:03:53.160 capital debt, lending money. It's about venture capital from all 0:03:53.240 --> 0:03:56.240 different sources and so how you go about lending money 0:03:56.280 --> 0:03:59.600 to these companies is it's really about pattern recognition. It's 0:03:59.600 --> 0:04:02.800 about understanding who the investors are, it's understanding what market 0:04:02.800 --> 0:04:05.200 they're in. There's a whole series of things that we do, 0:04:05.560 --> 0:04:07.720 but we've been doing it for so long and adapting 0:04:07.800 --> 0:04:11.640 this lending capability that we've learned to do it really 0:04:11.640 --> 0:04:14.960 well and both safely but also in a way that 0:04:15.080 --> 0:04:17.039 it's hard for other people who do it. So you're 0:04:17.040 --> 0:04:19.599 there in the nineties, that was quite an exciting period 0:04:19.680 --> 0:04:23.040 when everything was just going up, up up. How did 0:04:23.080 --> 0:04:25.400 you handle the other side of that when when the 0:04:25.480 --> 0:04:29.440 dot COM's imploded? What was the bank doing? How bad 0:04:29.480 --> 0:04:31.880 were losses and how did you manage them? Yes, so 0:04:31.880 --> 0:04:35.760 when I think back at that two thousand two thousand 0:04:35.880 --> 0:04:39.359 one time period, it was such an interesting time, and 0:04:39.400 --> 0:04:41.279 I described it as the highest of highs and the 0:04:41.320 --> 0:04:45.440 lowest of lows. And the beginning of two thousand, everything 0:04:45.480 --> 0:04:48.080 was going well. Everything was going well with our companies. 0:04:48.160 --> 0:04:50.440 They were growing so fast, they were getting started and 0:04:50.480 --> 0:04:53.120 going public within a few years. There was just such 0:04:53.160 --> 0:04:56.600 a euphoria at that time period. And then very quickly, 0:04:56.760 --> 0:04:59.280 kind of March of that year, there was the Baron's 0:04:59.400 --> 0:05:01.880 article that came out, and all of a sudden everything 0:05:01.960 --> 0:05:05.000 changed and it went from everything was going well to 0:05:05.279 --> 0:05:09.520 everything was going poorly. And what was fascinating about that time? 0:05:10.040 --> 0:05:12.200 You know, it's actually my view it's the time when 0:05:12.200 --> 0:05:15.279 you built the best relationships. Going through difficult times with 0:05:15.360 --> 0:05:18.560 venture capitalists and companies. You found out who you were 0:05:18.560 --> 0:05:21.039 as an institution. And so as much as I don't 0:05:21.080 --> 0:05:23.200 want to ever go back to that time period, there 0:05:23.200 --> 0:05:25.240 were a lot of good lessons learned that at that 0:05:25.240 --> 0:05:28.279 time period. But yeah, we took losses. It was challenging 0:05:28.320 --> 0:05:30.080 time for us. It took us a few years to 0:05:30.080 --> 0:05:33.120 get back into what i'll call a nice growth mode 0:05:33.160 --> 0:05:35.400 back in that kind of two thousand three, two thousand four. 0:05:35.960 --> 0:05:38.160 But I look back at it, finally I learned I 0:05:38.279 --> 0:05:40.840 learned a lot about the institution. I learned a lot 0:05:40.880 --> 0:05:43.240 about how to lend money, and I learned learned a 0:05:43.240 --> 0:05:45.560 lot about how to build relationships at that time. And 0:05:45.600 --> 0:05:50.800 if I remember correctly, the the Barons article featured Howard 0:05:50.839 --> 0:05:54.919 Marks and was titled Amazon dot Bomb, is that the 0:05:55.160 --> 0:05:58.200 uh like January two thousand At that way, I couldn't 0:05:58.200 --> 0:05:59.800 remember what month it was. I was either I thought 0:05:59.800 --> 0:06:02.320 it was March, but well Mars was when the pre 0:06:02.400 --> 0:06:05.000 announcements began. I don't remember if it was Intel or 0:06:05.080 --> 0:06:08.640 Dell y t K pulled a lot of tech purchases forward. 0:06:09.080 --> 0:06:13.039 So the first quarter was not surprisingly very light and 0:06:13.440 --> 0:06:16.560 at those high levels didn't take a lot to send 0:06:16.600 --> 0:06:19.760 that boulder down the hill. So so that turned out 0:06:19.800 --> 0:06:24.120 as difficult a period as it was, that turned out 0:06:24.120 --> 0:06:26.479 to be very formative, I don't know if that's the 0:06:26.560 --> 0:06:29.839 right word, but certainly valuable for the bank in its 0:06:29.880 --> 0:06:33.680 relationships with all the various players in Silicon Valley. It's 0:06:33.680 --> 0:06:36.920 the entrepreneurs, it's the vcs. Who else is in that 0:06:37.440 --> 0:06:40.200 ecology that that you had to deal with, Yeah, it's 0:06:40.200 --> 0:06:43.440 all the professional service providers in the innovation business. So 0:06:43.480 --> 0:06:45.839 it's the lawyers, it's the accountants, and it's it's really 0:06:45.960 --> 0:06:48.640 during the difficult times is when you build your reputation, 0:06:49.080 --> 0:06:51.320 and that reputation then is what's going to carry you 0:06:51.360 --> 0:06:53.920 through that next leg of growth. I don't want to 0:06:53.920 --> 0:06:56.080 go back to it. I can't say during the middle 0:06:56.120 --> 0:06:59.320 of it it was enjoyable, but again I do look 0:06:59.360 --> 0:07:02.440 back and say we learned so much and the relationships 0:07:02.800 --> 0:07:05.800 still to this day, are still I look back in 0:07:05.920 --> 0:07:08.320 some of my best relationships in the venture capital community 0:07:08.360 --> 0:07:11.320 were formed back in that time period working through difficult 0:07:11.320 --> 0:07:13.720 situations because you had to you had to work together 0:07:13.720 --> 0:07:17.679 to solve these problems, and it ended up being great 0:07:17.760 --> 0:07:20.080 from my career, ended up being great for the institution. 0:07:20.280 --> 0:07:24.360 When did you see optimism start to return to early 0:07:24.440 --> 0:07:29.840 stage investment post dot com crash? It took a while. 0:07:30.680 --> 0:07:33.280 I took a while. I would say in two thousand 0:07:33.440 --> 0:07:36.760 and three, two thousand four, two thousand and five. It 0:07:36.840 --> 0:07:40.120 was not one thing was really a gradual. Year by 0:07:40.200 --> 0:07:42.440 year it kind of picked up, and I I can 0:07:42.520 --> 0:07:46.800 trust that Versus the financial crisis in oh eight oh nine, 0:07:47.320 --> 0:07:51.720 in the innovation space, there was really only a couple 0:07:51.720 --> 0:07:56.240 of quarters where it took a pretty steep drop and 0:07:56.280 --> 0:08:00.280 then it basically rapidly increased. So two thousand and ten, 0:08:00.320 --> 0:08:02.800 two thousand and eleven, it was a much more steeper 0:08:03.160 --> 0:08:06.400 acceleration than it was back in two thousand two and 0:08:06.440 --> 0:08:09.600 two thousand and three. So I don't think people realized 0:08:09.640 --> 0:08:12.680 that they looked back at that time period that it 0:08:12.760 --> 0:08:15.640 was actually a better time to be investing in. So 0:08:16.040 --> 0:08:19.520 people invested more aggressively in the innovation space back in 0:08:19.840 --> 0:08:21.720 again two thousand and ten and two thousand eleven, and 0:08:21.760 --> 0:08:24.040 I think that was a good lesson. So you mentioned 0:08:24.040 --> 0:08:29.400 the financial crisis of O eight oh nine. Obviously, from 0:08:29.560 --> 0:08:33.120 let's call it March two thousand to either October oh 0:08:33.160 --> 0:08:36.280 two or March oh three, that was very focused on 0:08:36.400 --> 0:08:42.160 technology and telecom. The financial crisis obviously was financially focused, 0:08:42.559 --> 0:08:46.679 but everything froze, credit markets froze, capital flows frozen. How 0:08:46.679 --> 0:08:49.480 did you guys manage through that? What was the impact 0:08:49.559 --> 0:08:54.120 of the financial crisis on the environment in Silicon Valley 0:08:54.280 --> 0:08:58.920 relatively soon after the dot com crashed seven years later. Yeah, 0:08:59.280 --> 0:09:02.280 in the financial crisis, when I think about what happened, 0:09:02.400 --> 0:09:05.040 you know, we were impacted by it, and so we 0:09:05.559 --> 0:09:08.680 really were worried about how deep this was going to 0:09:08.760 --> 0:09:10.880 be and how long it was going to last. And 0:09:10.920 --> 0:09:13.079 so we started, we raised capital, we did a lot 0:09:13.120 --> 0:09:16.320 of things to be as protected as we could if 0:09:16.360 --> 0:09:18.840 this was going to last quite a long period of time. 0:09:19.080 --> 0:09:21.800 But again, what we were surprised by. I was surprised 0:09:22.160 --> 0:09:27.120 by how fast investing in the innovation market picked up, 0:09:27.360 --> 0:09:30.800 how fast venture capital came back, And so we were 0:09:30.920 --> 0:09:33.600 bottoming out venture capital and annual basis was down in 0:09:33.600 --> 0:09:37.760 that kind of twenty billion billion dollars per year. Dropped 0:09:37.760 --> 0:09:40.440 pretty significantly to that level from from what how high 0:09:40.520 --> 0:09:45.280 was it before? The highest amount historically up until the 0:09:45.360 --> 0:09:48.319 last couple of years was a hundred billion dollars invested 0:09:48.679 --> 0:09:52.439 in two thousand. It dropped off dramatically, and then it 0:09:52.520 --> 0:09:55.400 kind of worked its way back up and then dropped 0:09:55.440 --> 0:09:58.679 again in the financial crisis. And since the financial crisis 0:09:58.720 --> 0:10:01.520 it's gone, you know when from the billion dollars in 0:10:01.559 --> 0:10:04.559 the US, and it has been on this steady increase 0:10:04.640 --> 0:10:08.920 in the last few years. Has been truly incredible in comparison, 0:10:09.559 --> 0:10:14.600 last year was a hundred seventy billion dollars and this 0:10:14.679 --> 0:10:16.800 year already the first half the year has been a 0:10:16.880 --> 0:10:19.760 hundred eighty billion dollars in the first half. So this 0:10:19.880 --> 0:10:25.440 year first half, first half, so it's been an incredible 0:10:25.559 --> 0:10:28.920 first half the year. So I've seen people make the 0:10:29.000 --> 0:10:32.240 claim that there's too much money floating around, that oldest 0:10:32.280 --> 0:10:37.200 capital sloshing around, finds its way to companies and ends 0:10:37.280 --> 0:10:40.320 up over paying, and you end up with things like 0:10:40.400 --> 0:10:42.880 we work last year and all the craziness with soft 0:10:42.920 --> 0:10:47.000 bank how do you look at the vast amount of 0:10:47.640 --> 0:10:52.480 investable capital in the system. Have people become too focused 0:10:52.480 --> 0:10:55.640 on on early stage startups or or even pre I 0:10:55.679 --> 0:10:58.319 p O companies. I'm not one of those people, Berry, 0:10:58.520 --> 0:11:01.760 And it says that there's too much, too much liquidity 0:11:01.800 --> 0:11:05.360 out there, And and let me explain why. There's a 0:11:05.400 --> 0:11:08.680 few reasons. One is people look back to two thousand. 0:11:08.760 --> 0:11:11.440 I get that question a fair amount. Why it helped 0:11:11.480 --> 0:11:14.560 me understand why this isn't just a repeat of two thousand. Well, 0:11:14.600 --> 0:11:17.520 when you go back and think about two thousand, I 0:11:17.559 --> 0:11:21.439 would first argue, the size of the market that companies 0:11:21.520 --> 0:11:25.880 are going after is probably I would historically say ten 0:11:25.920 --> 0:11:29.439 times bigger. I would actually say it's more like fifty sixty, 0:11:29.679 --> 0:11:33.040 seventy times bigger than the market was back then. And 0:11:33.440 --> 0:11:37.360 technology is in every part of what our daily lives 0:11:37.360 --> 0:11:39.760 are all about. I would argue, when you think about 0:11:39.760 --> 0:11:42.040 the pandemic and our ability to get through this pandemic 0:11:43.040 --> 0:11:46.719 is a function of technology. So the zoom of the 0:11:46.760 --> 0:11:49.079 world and our ability to work remotely and all the 0:11:49.120 --> 0:11:52.120 different technologies that supported that. But let's also think about 0:11:52.160 --> 0:11:55.160 the healthcare, the vaccines and how rapidly they came to 0:11:55.240 --> 0:11:58.600 market with Madernay and others is because money was put 0:11:58.640 --> 0:12:01.839 into these companies in prior years. So the size of 0:12:01.880 --> 0:12:04.920 the market is much much, much bigger. That's number number one. 0:12:05.480 --> 0:12:10.280 Number two, the markets these companies are going after is 0:12:10.400 --> 0:12:14.160 are so much larger in scale, right it would be 0:12:14.559 --> 0:12:18.040 companies would be building software for industries or for companies 0:12:18.480 --> 0:12:22.760 to sell to industries, and now they're building software to 0:12:22.960 --> 0:12:27.320 attack and completely disrupt entire industries. And you can see 0:12:27.320 --> 0:12:30.320 that in hotels and taxis and all the different industries. 0:12:30.360 --> 0:12:32.120 So the size of the markets much bigger. So I 0:12:32.120 --> 0:12:34.560 look at this and say, billion dollars in the first 0:12:34.600 --> 0:12:36.640 half the year is a big number. I don't want 0:12:36.640 --> 0:12:40.360 to mistake that. But in the whole scheme of global money, 0:12:41.080 --> 0:12:44.120 it's still pretty small. So my view is, um, there's 0:12:44.360 --> 0:12:47.200 the liquidity is is actually okay given the size of 0:12:47.200 --> 0:12:50.800 the market. Let's start right with those two. What is 0:12:50.800 --> 0:12:55.680 the difference between s VB Financial Group and Silicon Valley Bank. 0:12:56.400 --> 0:12:58.520 Not much of a difference. Overall this we have a 0:12:58.520 --> 0:13:01.320 holding company and that's the financial group, and underside the 0:13:01.320 --> 0:13:04.880 holding company we have activities such as investment banking and 0:13:04.920 --> 0:13:08.240 some of the investing that we do in venture capital 0:13:08.280 --> 0:13:11.439 firms and in technology and life science companies. That's done 0:13:11.440 --> 0:13:14.680 at our holding company. And then the bank itself, Silicon 0:13:14.800 --> 0:13:18.360 Valley Bank is nine percent of what we do as 0:13:18.400 --> 0:13:21.720 far as the publicly traded company. So they're very similar. 0:13:21.760 --> 0:13:24.640 It's just what activities fit in which business. And you 0:13:24.679 --> 0:13:28.880 say Silicon Valley Bank, but you're not like a traditional bank. 0:13:29.040 --> 0:13:33.000 We were just talking about branches and tellers and things 0:13:33.040 --> 0:13:36.000 like that. That's not the sort of storefront you operate, 0:13:36.120 --> 0:13:39.600 is it. Now. We are a commercial bank predominantly, and 0:13:39.640 --> 0:13:42.800 that means that we work with companies. So companies again, 0:13:43.160 --> 0:13:46.800 you know, it's the startups that are being funded by 0:13:47.000 --> 0:13:49.880 families and friends. You know, people have ideas and they're 0:13:49.920 --> 0:13:53.559 raising fifty a hundred thousand dollars and they're starting in business. 0:13:53.600 --> 0:13:56.160 But they're starting a business that is in software or 0:13:56.200 --> 0:13:59.840 the internet or in e commerce. It's in those industries 0:14:00.120 --> 0:14:02.800 we we support, and that's the business side of it, 0:14:03.040 --> 0:14:05.199 and we grow with them as they get larger and larger, 0:14:05.200 --> 0:14:07.720 and hopefully they go public they get larger lists on 0:14:07.760 --> 0:14:09.400 a NASADAC or they get listed on the New York 0:14:09.400 --> 0:14:13.120 Stock Exchange. That's our models. So we don't have tellers, 0:14:13.320 --> 0:14:15.920 we don't have branches, because so much of this can 0:14:15.960 --> 0:14:19.240 be done virtually. And so when again, it helps when 0:14:19.560 --> 0:14:22.080 you know, when you have a tragedy like the pandemic occurring, 0:14:22.320 --> 0:14:24.360 you know we can still operate exactly as we had 0:14:24.400 --> 0:14:29.480 operated historically. So I noticed you sort of funds companies 0:14:29.520 --> 0:14:34.080 and bank with companies at different phases of their lifespan 0:14:34.680 --> 0:14:38.320 startup banking, venture funded, late stage. Let's let's start up 0:14:38.320 --> 0:14:43.080 with what is SVB startup banking. Yeah, So weave it 0:14:43.080 --> 0:14:45.880 into our strategy overall because I think it's helpful in context. 0:14:46.360 --> 0:14:50.080 Our strategy is we want to bring companies in that 0:14:50.120 --> 0:14:52.720 are just getting started. So think about it like the 0:14:52.760 --> 0:14:55.080 top of the funnel. You want to bring in thousands 0:14:55.080 --> 0:14:58.760 of new companies each year, new companies that are being formed, 0:14:58.800 --> 0:15:01.960 and we're talking about six, seven, eight nine thousand new 0:15:02.000 --> 0:15:05.920 companies per year. We support them with banking services, getting 0:15:05.920 --> 0:15:08.480 them off the ground, give them an advice, making connections 0:15:08.480 --> 0:15:11.760 to investors, making connections to their service providers, and then 0:15:11.800 --> 0:15:14.160 we tailor our products to them. As they raise their 0:15:14.160 --> 0:15:17.040 first round of venture capital financing, their second round of 0:15:17.320 --> 0:15:19.960 venture capital financing. We're lending them money in unique ways. 0:15:20.680 --> 0:15:25.400 Ventured debt could be acquisition financing all different products and services, 0:15:25.440 --> 0:15:29.120 giving them FX capabilities as they go international. And then 0:15:29.160 --> 0:15:32.120 we support them with even greater capabilities as they go 0:15:32.240 --> 0:15:35.560 international and they go public and they're doing hundreds of 0:15:35.560 --> 0:15:38.520 millions of dollars of revenue. And so our our strategy 0:15:38.560 --> 0:15:42.040 is bring them in early and support them all throughout 0:15:42.040 --> 0:15:45.280 their life cycle as they get larger and larger. That's, 0:15:45.440 --> 0:15:48.520 in a in a nutshell, that's what our our strategy is. 0:15:48.560 --> 0:15:50.720 And to do it not just in the US, but 0:15:50.840 --> 0:15:52.880 to do it globally, to do it in the UK, 0:15:53.080 --> 0:15:54.920 to do in Europe, to do it in China, to 0:15:54.920 --> 0:15:57.200 do it in Canada. And that's what we got to do. 0:15:57.280 --> 0:16:00.160 Work with the most innovative, the coolest companies in the 0:16:00.280 --> 0:16:03.400 entire world. So let's let's put some numbers on that 0:16:05.160 --> 0:16:08.320 of venture backed tech and life sciences company in the 0:16:08.440 --> 0:16:11.920 US Bank with you. That's a tremendous number. And then 0:16:11.960 --> 0:16:15.000 if we talk about those same sort of companies that 0:16:15.400 --> 0:16:21.080 have gone I p O of them in bank with you. So, 0:16:21.080 --> 0:16:24.800 so you guys really seem to have cornered this market. 0:16:25.800 --> 0:16:29.920 What are you doing to protect that giant lead? Yeah, 0:16:30.040 --> 0:16:33.560 I definitely don't like the description cornered because that implies 0:16:33.600 --> 0:16:35.760 in some ways that there isn't competition and you don't 0:16:35.760 --> 0:16:37.640 have to wake up every day and kind of Andrew 0:16:37.680 --> 0:16:40.760 Groves quote only the paranoid survive, which is something we 0:16:40.880 --> 0:16:45.360 certainly adhere to. You know, it starts with really being 0:16:45.480 --> 0:16:51.080 relentlessly focused on helping these companies at all stages figuring 0:16:51.120 --> 0:16:53.920 out what are the keys to their success. What I 0:16:54.160 --> 0:16:56.480 was talked to our team about, it's that one piece 0:16:56.480 --> 0:17:00.800 of advice, It's that one connection, It's that one piece 0:17:00.840 --> 0:17:04.040 of help that can make the difference between a company 0:17:04.080 --> 0:17:08.000 being successful and not being successful. And you have to 0:17:08.000 --> 0:17:11.480 think about that every single day. Is you engage with 0:17:11.680 --> 0:17:15.639 and you work with our clients. And it makes sense 0:17:15.680 --> 0:17:18.159 that when you have teams of people at SVB, that 0:17:18.280 --> 0:17:20.600 this is all they do, work with companies that are 0:17:20.640 --> 0:17:25.760 in the healthcare industry, biotech companies or medical devices, or 0:17:25.960 --> 0:17:29.000 software or cyber software. That if they do that all 0:17:29.080 --> 0:17:32.080 day long and the next cybersecurity software walks in the door, 0:17:32.119 --> 0:17:34.240 their ability to point them in the right direction to 0:17:34.280 --> 0:17:38.359 make interactions or engagements or connections that makes such a 0:17:38.440 --> 0:17:40.920 huge difference. And so we just have to keep thinking 0:17:40.920 --> 0:17:44.640 about that every single day, and that's you know, differentiating 0:17:45.000 --> 0:17:47.639 and it's also what's really a lot of fun. If 0:17:47.680 --> 0:17:50.240 you believe you have helped a company, you go home 0:17:50.280 --> 0:17:53.000 at night you feel pretty darn good that you've made 0:17:53.040 --> 0:17:57.040 a difference in a company that's changing something significant in 0:17:57.080 --> 0:18:01.400 the world, very impressive. Let's talk about later stage companies 0:18:01.400 --> 0:18:05.520 and public companies. Do you offer a similar suite of 0:18:05.560 --> 0:18:09.000 services and and how different is that from the very 0:18:09.000 --> 0:18:12.119 early stage compan Yeah, it is, it is very different, um, 0:18:12.160 --> 0:18:15.560 but it is still again in that same commentary about 0:18:15.600 --> 0:18:19.000 helping them be successful, that's what the product said, is 0:18:19.040 --> 0:18:21.440 that's what the solutions are. That's where all the advice 0:18:21.840 --> 0:18:25.240 and connections. So we may bring, um, some CFOs together 0:18:25.359 --> 0:18:27.240 or ceo s together. If a company is thinking about 0:18:27.280 --> 0:18:30.240 going public, well let's connect them with other c e 0:18:30.359 --> 0:18:32.359 o s who have gone through that process so they 0:18:32.359 --> 0:18:35.080 can get the advice about how to do that. Do 0:18:35.119 --> 0:18:37.320 you raise money before you go public or do you 0:18:37.400 --> 0:18:39.520 raise kind of all the money you need when you 0:18:39.560 --> 0:18:42.800 go public or after you go public? Giving that feedback 0:18:42.840 --> 0:18:46.200 and that experience to other people going through that same thing, 0:18:46.520 --> 0:18:49.640 those connections are really, really, really valuable. But other things 0:18:49.680 --> 0:18:51.920 that are different, how much money you lend to them, 0:18:51.920 --> 0:18:54.600 the type of money it's acquisition financing. It could be 0:18:54.680 --> 0:18:58.280 large acquisition financing, it could be making introductions to pe 0:18:58.320 --> 0:19:02.120 firms who may want to take them private if they're 0:19:02.160 --> 0:19:05.240 public already. So it's a whole suite of solutions that 0:19:05.280 --> 0:19:07.560 we give to these companies. And again I'll go back 0:19:07.560 --> 0:19:09.560 to what I said, that's the most important, that's the 0:19:09.560 --> 0:19:12.280 most fun part when you really do believe that you've 0:19:12.320 --> 0:19:15.280 made a difference in that company. Very interesting. Tell us 0:19:15.280 --> 0:19:18.000 a little bit about open Door. I love the story 0:19:18.119 --> 0:19:22.040 that everybody passed on them. What did you guys see 0:19:22.080 --> 0:19:25.040 in them? That was so unique? Part of companies like 0:19:25.080 --> 0:19:27.560 an open door. And there's such a long list of 0:19:27.600 --> 0:19:29.439 companies that you put it, you know, put in that 0:19:29.520 --> 0:19:33.560 list that I think the biggest challenge for individuals to 0:19:33.600 --> 0:19:37.520 look at these companies and to really believe in them 0:19:37.760 --> 0:19:41.560 is to understand what they're going after. And it's very 0:19:41.600 --> 0:19:44.040 easy to say no, It's very easy to list all 0:19:44.080 --> 0:19:47.080 the challenges and the reasons that something may not work. 0:19:47.520 --> 0:19:50.760 It is much more difficult to be that optimistic point 0:19:50.760 --> 0:19:53.480 of view and to say what if, what if they're successful? 0:19:53.480 --> 0:19:55.840 What if they're right, What if they actually go after 0:19:55.880 --> 0:19:58.920 this market? How big could this be? And then understanding 0:19:59.400 --> 0:20:02.800 again who investors are, understanding the management team and there 0:20:03.000 --> 0:20:06.240 and their dry for success. All those things are ingredients 0:20:06.600 --> 0:20:09.000 that really gives you that view of the potential for 0:20:09.040 --> 0:20:12.080 that business. And that that's what I mean, Honestly, that's 0:20:12.359 --> 0:20:15.280 the most inspiring part of what I get to do 0:20:15.320 --> 0:20:19.000 as a CEO to see these companies, to understand where 0:20:19.000 --> 0:20:21.920 they're going, to listen to the CEOs and the c 0:20:22.119 --> 0:20:24.119 suites in these companies, to see where they want to go, 0:20:24.200 --> 0:20:25.720 where they want to go and what they want to build. 0:20:26.080 --> 0:20:30.199 UM is truly incredible And that's that's incredibly motivating to me, 0:20:30.280 --> 0:20:32.480 and I know it's incredibly motivating to our team. So 0:20:32.480 --> 0:20:36.440 so let's stick with that. And before we describe how 0:20:36.480 --> 0:20:40.960 the open door investment worked out, people should be aware 0:20:41.119 --> 0:20:45.000 that the vast majority of venture investments don't pan out. 0:20:45.520 --> 0:20:49.000 This is a space where somewhere between sixty the companies 0:20:49.640 --> 0:20:52.239 UM never really get off the ground in in an 0:20:52.240 --> 0:20:55.239 appreciable way. How do you manage that risk and how 0:20:55.240 --> 0:20:58.560 do you make sure that whatever that relationship is, you're 0:20:58.600 --> 0:21:02.239 not just burning through She at a horrifying rate. So 0:21:02.280 --> 0:21:06.000 there's the investment piece of these companies, and then there's 0:21:06.040 --> 0:21:10.560 the lending money to these companies. So the investing piece 0:21:10.800 --> 0:21:15.040 is you you have to have a few winners to 0:21:15.200 --> 0:21:19.360 make up for all the companies where they don't. They 0:21:19.400 --> 0:21:23.520 don't either realize their full potential or they outright fail. 0:21:24.160 --> 0:21:28.200 So equity is very different than lending money. Lending money, 0:21:28.720 --> 0:21:31.520 you don't have to have as many winners to make 0:21:31.600 --> 0:21:33.520 up for the for the ones you lose money on, 0:21:33.640 --> 0:21:36.720 you do have a higher loss rate um, but because 0:21:37.200 --> 0:21:40.400 we as a senior lender in these loans, we get 0:21:40.440 --> 0:21:43.480 repaid first when you when a company goes out of business, 0:21:43.560 --> 0:21:46.360 we get repaid as the company's winding down. That has 0:21:46.400 --> 0:21:49.719 certain protections to us. So loss rates are still higher, 0:21:50.080 --> 0:21:52.439 but you can still underwrite them in a way that 0:21:52.600 --> 0:21:55.960 is different than the equity investors do. We don't have 0:21:56.000 --> 0:21:58.080 the same upside and we don't have the same downside. 0:21:58.640 --> 0:22:02.280 On the lending side, if something doesn't work out and 0:22:02.320 --> 0:22:05.960 you're recapturing eight of the loan, that's a loss, but 0:22:06.080 --> 0:22:09.200 it's not a total right. You're not writing everything off 0:22:09.320 --> 0:22:11.280 right on the equity side, if it doesn't work out, 0:22:11.440 --> 0:22:14.320 that's take it down to zero. It usually means that 0:22:14.320 --> 0:22:15.840 you're gonna take it down to zero, you're gonna take 0:22:15.840 --> 0:22:17.760 a complete loss. Yes, And at the end of the 0:22:17.800 --> 0:22:20.840 open Door investment, you guys were the only ones who 0:22:21.119 --> 0:22:24.560 were willing to make that equity investment in open door, 0:22:25.119 --> 0:22:27.959 and ultimately they end up going public with a spack. 0:22:28.480 --> 0:22:31.879 It's a giant winner for everybody involved. That has to 0:22:32.000 --> 0:22:35.120 give you a lot of confidence that, Hey, our due 0:22:35.160 --> 0:22:39.120