WEBVTT - JPMorgan’s Melissa Smith on Middle Market Banking 0:00:02.600 --> 0:00:11.960 Bloomberg Audio Studios, Podcasts, radio News. This is Masters in 0:00:12.000 --> 0:00:15.520 Business with Barry Ritholts on Bloomberg Radio. 0:00:16.320 --> 0:00:19.800 This week on the podcast, I have yet another extra 0:00:19.880 --> 0:00:23.759 special guest. Melissa Smith is co head of Commercial Banking 0:00:24.160 --> 0:00:25.160 for JP Morgan. 0:00:25.480 --> 0:00:30.240 Previously, she was co head of the bank's Innovation Economy Group. 0:00:30.880 --> 0:00:34.279 Really fascinating because she sees the world from a very 0:00:34.320 --> 0:00:40.120 unique perch. Has incredible access to every aspect of both 0:00:40.200 --> 0:00:45.879 commercial and investing banking that a small startup or medium 0:00:45.920 --> 0:00:49.159 sized company and by medium I mean up to two 0:00:49.240 --> 0:00:54.440 billion dollars in revenue might need, and that gives her 0:00:54.480 --> 0:00:59.400 this really incredible set of insights into how these companies 0:00:59.400 --> 0:01:03.240 are growing, what they need, what direction various industries are 0:01:03.240 --> 0:01:05.920 moving in. It's really kind of fascinating because if you 0:01:06.120 --> 0:01:10.679 remember back twenty five years ago, Wall Street and the 0:01:10.800 --> 0:01:13.960 large investment banks and brokers were kind of accused of 0:01:14.600 --> 0:01:18.680 moving up market and abandoning that whole middle section and 0:01:18.920 --> 0:01:22.800 allowing private equity to get a toe hold there. To 0:01:22.880 --> 0:01:26.880 their credit, JP Morgan has aggressively moved back into what 0:01:26.959 --> 0:01:30.480 some people used to call, you know, middle merchant banking 0:01:30.680 --> 0:01:34.880 or middle market banking. And I thought this conversation is 0:01:35.400 --> 0:01:38.640 just a whole world that you don't know exists and 0:01:38.760 --> 0:01:42.679 is in fact robust and growing rapidly. I thought this 0:01:42.840 --> 0:01:46.040 was a fascinating conversation and I think you will also 0:01:46.200 --> 0:01:51.480 with no further ado, my conversation with JP Morgan's Melissa Smith. 0:01:51.760 --> 0:01:53.520 Thank you so much for having me. It's a pleasure 0:01:53.560 --> 0:01:53.920 to be here. 0:01:53.960 --> 0:01:56.200 Well, thank you for being here. Let's talk a little 0:01:56.240 --> 0:01:59.760 bit about your background before we work up to JP Morgan. 0:02:00.640 --> 0:02:03.760 Bachelor's in political science from American University and then you 0:02:03.800 --> 0:02:07.520 get a master's in public policy from University of Chicago, 0:02:08.280 --> 0:02:11.560 not the traditional path for people in finance. 0:02:11.919 --> 0:02:13.120 What was the original plan? 0:02:13.680 --> 0:02:15.560 So I definitely thought that I was going to work 0:02:15.560 --> 0:02:20.120 in the public sector. When I'm recruiting at JP Morgan, 0:02:20.320 --> 0:02:22.400 I always get the question sort of how did you 0:02:22.400 --> 0:02:24.280 get into investment banking? And I would love to tell 0:02:24.280 --> 0:02:25.880 people I had a grand plan. I didn't really have 0:02:25.880 --> 0:02:30.160 a grand plan. But my policy degree was at University 0:02:30.200 --> 0:02:32.560 of Chicago, so it was very heavy econ and stats 0:02:32.600 --> 0:02:35.200 and basically the same core curriculum as the business school. 0:02:35.840 --> 0:02:39.320 And in my summer in between, I worked for Mayor 0:02:39.440 --> 0:02:42.760 Daily in Chicago and economic development issues and as I 0:02:42.840 --> 0:02:45.200 was doing that, I sort of decided it would be 0:02:45.240 --> 0:02:47.720 even more interesting to come to the public sector at 0:02:47.760 --> 0:02:51.240 a more senior level. And I also wanted to make 0:02:51.280 --> 0:02:53.560 sure that I was going somewhere that would really leverage 0:02:53.560 --> 0:02:56.680 the quantitative skills that I was acquiring at Chicago. And 0:02:56.760 --> 0:02:58.280 I also thought it'd be a really good idea to 0:02:58.280 --> 0:03:00.000 be able to pay off my undergrad and grad school life. 0:03:00.720 --> 0:03:04.079 So that makes a lot of sense. But before you 0:03:04.160 --> 0:03:07.640 got your master's in public policy, you have a little 0:03:07.680 --> 0:03:12.440 bit of a different professional experience. You began ballet at 0:03:12.480 --> 0:03:16.440 age four and dance professionally for how many years? 0:03:16.560 --> 0:03:17.320 For three years? 0:03:17.680 --> 0:03:20.280 Tell us about that that is not the usual path 0:03:20.320 --> 0:03:21.519 to Wall Street. 0:03:21.720 --> 0:03:24.040 Definitely not so. Yes, I started taking ballet at a 0:03:24.160 --> 0:03:24.919 very early age. 0:03:25.000 --> 0:03:25.480 That was my. 0:03:25.520 --> 0:03:31.520 Original career aspirations. Starting in seventh grade. My poor mother 0:03:31.639 --> 0:03:33.680 drove me one hundred and twenty miles round trip every 0:03:33.760 --> 0:03:35.120 day to Washington, d C. 0:03:35.280 --> 0:03:37.000 To go to ballet where I was from. 0:03:37.400 --> 0:03:39.880 Left school early at noon, kind of got home at 0:03:39.920 --> 0:03:43.640 nine or ten at night every night, and so, you know, 0:03:43.760 --> 0:03:46.240 quite frankly, my parents were sick of driving me. So 0:03:46.520 --> 0:03:49.040 I graduated from high school year early in order to 0:03:49.120 --> 0:03:52.160 dance and sort of continue my dance training and then 0:03:52.440 --> 0:03:55.920 dance professionally before I went to college. And my again, 0:03:55.960 --> 0:04:00.640 my aspiration was to just continue dancing professionally. As you 0:04:00.680 --> 0:04:03.000 may or may not be aware, you know, very few 0:04:03.040 --> 0:04:04.920 people obviously sort of make it in that world point 0:04:05.000 --> 0:04:06.840 zero zero zero zer zir one percent are ever going 0:04:06.880 --> 0:04:08.760 to be an ABT, which is sort of the pinnacle 0:04:08.760 --> 0:04:12.760 in the US American Ballet theater. And so while I was, 0:04:12.840 --> 0:04:14.240 you know, good enough to be in a small company, 0:04:14.280 --> 0:04:15.360 I was not going to be an ABT and I 0:04:15.400 --> 0:04:17.159 didn't want to totally give up my education, and so 0:04:17.200 --> 0:04:18.039 that's why I stopped. 0:04:18.279 --> 0:04:21.839 I know people who were pretty far along that same process, 0:04:22.400 --> 0:04:25.680 and as they've gotten older, they talk about like they 0:04:25.720 --> 0:04:29.679 sound like old football players talking about injuries, their ankles, 0:04:29.720 --> 0:04:32.839 their toes, their caves, their knees. I'm like, wait, no, no, 0:04:32.880 --> 0:04:35.039 you guys are just dancing and they laugh when you 0:04:35.080 --> 0:04:35.480 say that. 0:04:36.000 --> 0:04:37.719 What was your experience like with that? 0:04:38.440 --> 0:04:41.279 I mean, it was an amazing experience in that it 0:04:41.400 --> 0:04:45.080 teaches you such a huge amount of discipline and you know, 0:04:45.320 --> 0:04:49.440 takes determination, perseverance and kind of grit. You know, just 0:04:49.480 --> 0:04:51.520 back to there's very few people who sort of make it. 0:04:51.560 --> 0:04:53.600 You are in a sort of a siloed world because 0:04:53.760 --> 0:04:55.159 all you do every day is dance. Is kind of 0:04:55.360 --> 0:04:58.279 how I describe it. And I would also say, you know, 0:04:58.400 --> 0:05:00.280 I can have this debate with people all day long. 0:05:01.360 --> 0:05:04.120 I think there is no greater form of athlete than 0:05:04.160 --> 0:05:07.800 a dancer. To your point, they are It is grueling 0:05:07.839 --> 0:05:12.320 on one's body and really really physical, really really physical. 0:05:12.440 --> 0:05:15.800 I'm in any way that any other athletics are. With 0:05:15.880 --> 0:05:18.520 the added sort of thing on top, which is the 0:05:18.560 --> 0:05:21.360 whole point of ballet is to make it look effortless. 0:05:21.600 --> 0:05:23.720 There's no like grunting down the basketball court or the 0:05:23.720 --> 0:05:26.679 football court, right, So it takes the same amount of strength, 0:05:26.720 --> 0:05:29.240 but you add the control of your body on top 0:05:29.279 --> 0:05:31.000 of that to make it look effortless. And that's why, 0:05:31.160 --> 0:05:33.600 you know, sort of the athleticism is very unique. But 0:05:33.640 --> 0:05:36.400 it was an incredible experience and I felt very lucky 0:05:36.400 --> 0:05:38.240 at a young age to have something that I was 0:05:38.279 --> 0:05:41.240 so passionate about. Not everybody sort of has that in 0:05:41.279 --> 0:05:42.599 their lives at an early age. 0:05:42.920 --> 0:05:48.960 And your comment about perseverance and grit, those are personality characteristics. 0:05:49.120 --> 0:05:51.799 I don't know you know whether to call them skills 0:05:51.880 --> 0:05:54.640 or not, but that will help you no matter what 0:05:54.680 --> 0:06:00.000 you do. Absolutely absolutely, So ballet to college to grad school. 0:06:00.560 --> 0:06:02.520 How did you stumble into JP Morgan? 0:06:03.240 --> 0:06:06.039 So again, did not have a grand plan at the 0:06:06.160 --> 0:06:09.040 time that I was in Policy School at Chicago. JP 0:06:09.160 --> 0:06:12.960 Morgan's public finance team recruited specifically at the policy school. 0:06:13.080 --> 0:06:14.880 Just back to it was this, you know, very kind 0:06:14.880 --> 0:06:19.320 of quantitatively based and so kind of randomly went to 0:06:19.360 --> 0:06:22.320 the interview to be quite honest, and was you know, 0:06:22.440 --> 0:06:24.800 did well, was offered a role sort of back back 0:06:24.839 --> 0:06:26.440 to my earlier point, kind of thought it was good 0:06:26.440 --> 0:06:28.680 to get some private sector credibility at my resume, learn 0:06:28.760 --> 0:06:32.760 something new, and I think probably as anybody coming out 0:06:32.800 --> 0:06:34.840 of either undergrad or grad school thinks, you know, oh, 0:06:34.880 --> 0:06:36.520 I'll go do this for five years and sort of. 0:06:36.480 --> 0:06:37.720 See where that leads me. 0:06:38.200 --> 0:06:39.880 And lo and behold, you know, have been at JP 0:06:39.960 --> 0:06:41.920 Moore in to your point, you know, twenty plus years. 0:06:41.680 --> 0:06:42.880 Now, that's amazing. 0:06:42.920 --> 0:06:46.239 So you start as an associate, You're focused on debt? Yes, 0:06:46.640 --> 0:06:48.640 was there an interest in debt? Was that just related 0:06:48.680 --> 0:06:49.640 to public policy? 0:06:49.960 --> 0:06:52.479 So I started in public finance, which is back to 0:06:52.480 --> 0:06:54.320 that's why they were recruiting in the policy, So taxes 0:06:54.320 --> 0:06:58.040 and bonds for municipalities. I did that for about a 0:06:58.120 --> 0:06:59.840 year and a half, two years, and then I moved 0:06:59.839 --> 0:07:02.040 in to deck capital markets for corporates, so kind of 0:07:02.080 --> 0:07:05.240 an easy transition taxes and bonds to a corporate bonds. 0:07:05.920 --> 0:07:07.680 And then I spent you know, the majority of my 0:07:07.760 --> 0:07:09.880 earlier career, the first sixteen years of my career in 0:07:09.920 --> 0:07:11.840 the investment bank in debt capital markets. 0:07:12.160 --> 0:07:16.040 And just for the youngsters listening, twenty five or so 0:07:16.200 --> 0:07:21.200 years ago, high rated municipal tax free bonds were yielding 0:07:21.440 --> 0:07:25.040 five six percent maybe more, maybe more. Just those were 0:07:25.080 --> 0:07:28.239 the before we start where I guess we're only halfway 0:07:28.240 --> 0:07:31.680 through our forty year rate cutting cycle. 0:07:32.200 --> 0:07:33.960 You could get tax re yield. 0:07:33.760 --> 0:07:37.000 At seven percent imagine and a rated not jump. 0:07:37.400 --> 0:07:40.280 Imagine what that was like totally all right, So so you. 0:07:40.200 --> 0:07:45.920 Go from public finance, how did you evolve towards cohad 0:07:45.920 --> 0:07:47.040 of innovation economy? 0:07:47.480 --> 0:07:49.880 So was in a decent deck capital markets? I like 0:07:49.960 --> 0:07:52.360 to say I grew up in deck capital markets, which, 0:07:52.440 --> 0:07:54.440 as an aside, I think that was such a great 0:07:54.560 --> 0:07:58.160 experience because you know, in DCM you're sitting on the 0:07:58.200 --> 0:08:01.600 trading floor, right. Loved being in that environment because I 0:08:01.600 --> 0:08:04.040 think it fosters learning so much more quickly. I literally 0:08:04.040 --> 0:08:06.760 sat next to the managing director that I worked for 0:08:06.800 --> 0:08:08.880 and listen on all the client calls and sort of 0:08:09.200 --> 0:08:12.080 you understand much more quickly how to handle specific situations. 0:08:12.760 --> 0:08:15.640 I also it was sort of an interesting dynamic where 0:08:15.800 --> 0:08:18.880 you're on the private side, on the origination side, talking 0:08:18.920 --> 0:08:21.600 to corporate clients and advising them about their next you know, 0:08:21.640 --> 0:08:24.680 debt raise or their funding needs, but you have to 0:08:24.680 --> 0:08:26.680 spend a lot of time with the traders who are 0:08:26.680 --> 0:08:29.240 trading the bonds and the public markets, and they're obviously 0:08:29.320 --> 0:08:31.680 on the public side, so you're sort of walled off, right, 0:08:31.760 --> 0:08:34.040 But then you'd have to go over on to talk 0:08:34.040 --> 0:08:37.200 to the traders, and sometimes you'd walk over there and 0:08:37.760 --> 0:08:39.920 you need information from them, but they can't give you 0:08:39.920 --> 0:08:42.840 any information, and so you'd walk over there and sometimes 0:08:42.840 --> 0:08:45.240 they sort of look at you because they're busy, and 0:08:45.280 --> 0:08:46.959 you sort of get this feeling, you know, get out 0:08:46.960 --> 0:08:49.319 of my face, Well what do you want? So I 0:08:49.360 --> 0:08:51.840 think it was an interesting experience because you have to 0:08:51.960 --> 0:08:55.559 kind of, you know, gain some credibility with them, and 0:08:55.800 --> 0:08:59.079 you know, ask insightful questions, show that you have some 0:08:59.120 --> 0:09:01.400 sort of use. So I thought thought it was a 0:09:01.400 --> 0:09:02.760 great way to kind of like grow up and learn 0:09:02.760 --> 0:09:06.320 about the business. But again, was in DCM for sixteen years, 0:09:06.320 --> 0:09:08.320 including three years that I was in London running our 0:09:08.360 --> 0:09:10.240 European dek Coup of Markets business. 0:09:10.240 --> 0:09:12.280 I got a lot of questions for you about Europe, 0:09:12.280 --> 0:09:14.720 but we'll so back to that later. I'm looking at 0:09:14.720 --> 0:09:17.800 my own handwriting twenty two or twenty seven years? 0:09:17.880 --> 0:09:18.920 Is that twenty. 0:09:18.640 --> 0:09:19.600 Seven years you've been there? 0:09:19.640 --> 0:09:22.079 I think it's twenty six so going on twenty so 0:09:22.200 --> 0:09:24.200 going on twenty seven now I feel old. 0:09:24.440 --> 0:09:25.160 So it's not. 0:09:25.520 --> 0:09:29.079 Well, what's more fascinating is and you started when you were, 0:09:29.240 --> 0:09:32.440 you know, seventeen, so there got a big deal. But 0:09:33.040 --> 0:09:36.200 you know, that's relatively rare these days to be at 0:09:36.600 --> 0:09:41.040 any one firm for quarter plus century. What is so 0:09:41.120 --> 0:09:43.640 special at JP Morgan? What's kept you there for so long? 0:09:43.880 --> 0:09:44.240 Sure? 0:09:44.520 --> 0:09:47.400 So first I would say you will actually find many 0:09:47.440 --> 0:09:49.280 senior people at JP Morgan who have been there for 0:09:49.320 --> 0:09:51.280 twenty years plus, and I think that is obviously a 0:09:51.320 --> 0:09:54.319 great testament to the culture that we have at the firm. Secondly, 0:09:54.320 --> 0:09:57.160 I would say JP Morgan is a large place, clearly, 0:09:57.280 --> 0:09:59.679 and what that means is there are multiple lines of 0:09:59.679 --> 0:10:01.640 business with many different things that you can do over 0:10:01.679 --> 0:10:05.200 the course of your career. And generally speaking, we are 0:10:05.520 --> 0:10:07.520 sort of number one or number two in everything that 0:10:07.559 --> 0:10:10.000 we do, which which again is a great privilege to 0:10:10.040 --> 0:10:12.280 work there from that perspective, so it doesn't make a 0:10:12.320 --> 0:10:15.040 lot of sense to go necessarily to another firm when 0:10:15.040 --> 0:10:16.720 you're sort of trading down, if you will. 0:10:16.720 --> 0:10:19.080 In some instances maybe I shouldn't say that the way. 0:10:18.920 --> 0:10:21.439 But and so I think what's cut me there is, 0:10:21.640 --> 0:10:24.120 you know, a just the opportunity to do many different things, 0:10:24.200 --> 0:10:27.400 learn about many other aspects of the business. And two, 0:10:27.880 --> 0:10:30.640 you know, obviously you know very much appreciate kind of 0:10:30.640 --> 0:10:32.840 the culture and environment at JP Morgan kind of back 0:10:32.880 --> 0:10:35.000 to that's why people stay there for so long. It's 0:10:35.000 --> 0:10:38.760 a very team morek oriented environment. You know, we like 0:10:38.800 --> 0:10:40.960 to quote JP Morgan first class business in a first 0:10:40.960 --> 0:10:44.200 class way. We take that very seriously and just appreciated 0:10:44.280 --> 0:10:45.120 that about the environment. 0:10:45.400 --> 0:10:49.000 So let's talk about your dual role, your your cohead 0:10:49.000 --> 0:10:53.400 of Innovation Economy and your head of specialized industries. Tell 0:10:53.480 --> 0:10:55.559 us what each of those roles encompass. 0:10:55.800 --> 0:11:00.360 Sure, so our specialized Industry's business sits within our our 0:11:00.400 --> 0:11:02.840 middle market business, and just to define that middle market 0:11:02.960 --> 0:11:05.760 sort of means in the commercial banking, right, so anything 0:11:05.800 --> 0:11:08.000 from kind of a very early stage startup to a 0:11:08.040 --> 0:11:10.000 company that's up to two billion in top line revenue, 0:11:10.000 --> 0:11:11.719 so kind of a very wide wide readmit. 0:11:11.520 --> 0:11:12.320 If you will. 0:11:12.440 --> 0:11:15.280 About half of that business is the industry business that 0:11:15.360 --> 0:11:18.320 I run, So I have nineteen different industry teams, so 0:11:18.400 --> 0:11:21.480 bankers that are experts in those specific industries to provide 0:11:21.520 --> 0:11:24.280 obviously coverage to clients in those industries. And I would 0:11:24.320 --> 0:11:26.200 just say, I mean, we are just a big believer 0:11:26.440 --> 0:11:32.520 in the the you know, better coverage and better that 0:11:32.559 --> 0:11:35.240 we can much better serve a client when our bankers 0:11:35.280 --> 0:11:38.280 have that expertise in terms of the industry. So we're 0:11:38.360 --> 0:11:40.920 kind of very big believers in industry expertise and kind 0:11:40.920 --> 0:11:43.680 of hyper segmentation in terms of covering companies at different 0:11:44.000 --> 0:11:47.240 stages and sizes in their life cycle. So nineteen different industries. 0:11:47.280 --> 0:11:49.720 Innovation economy is basically a part of that, and we 0:11:49.880 --> 0:11:54.119 use that innovation economy kind of umbrella term to describe 0:11:54.200 --> 0:11:57.440 tech early stage tech, life sciences, health tech, climate tech 0:11:57.480 --> 0:12:02.080 businesses which are generally making high growth VC backs businesses overall. 0:12:02.280 --> 0:12:04.520 Well, let's talk a little bit about that. I'm familiar 0:12:04.559 --> 0:12:07.720 with a lot of the companies that vcs tend to back. 0:12:08.800 --> 0:12:12.000 But one of the things that we've been noticing very 0:12:12.040 --> 0:12:15.360 obviously over the past few years is the amount of 0:12:16.240 --> 0:12:21.760 not venture income, but either private equity or private debt. 0:12:22.400 --> 0:12:26.000 How does that play out in the companies you're servicing. 0:12:25.760 --> 0:12:27.640 Absolutely two really important trends. 0:12:27.679 --> 0:12:31.079 So I would say so within the innovation economy, to 0:12:31.120 --> 0:12:32.719 your point, a lot of the companies tend to be 0:12:32.800 --> 0:12:36.040 VC backed, but there definitely is growing growing sort of 0:12:36.080 --> 0:12:38.920 crossover into into growth equity funds. I think in the 0:12:38.920 --> 0:12:42.079 middle market commercial banking business as a whole, there has 0:12:42.160 --> 0:12:45.040 been a ton of activity from the financial sponsor community, 0:12:45.120 --> 0:12:47.360 so a ton of consolidation of those middle market businesses. 0:12:47.400 --> 0:12:49.200 And when you just look at sort of the levels 0:12:49.200 --> 0:12:51.520 of activity, like what are sponsors buying, it is within 0:12:51.559 --> 0:12:53.599 that middle market space. So that has definitely driven a 0:12:53.600 --> 0:12:56.160 lot of activity overall and something that we spend a 0:12:56.160 --> 0:13:00.400 lot of time talking about with with our clients. And 0:13:00.440 --> 0:13:02.960 then secondly, to your point, on the private credit direct 0:13:03.040 --> 0:13:05.800 lending side, that also has been just a massive trend 0:13:05.960 --> 0:13:08.240 impacting sort of that part of the business with these 0:13:08.280 --> 0:13:11.360 companies looking for alternative sources of capital and direct lending 0:13:11.400 --> 0:13:15.079 being a great, a great alternative. That's in fact why 0:13:15.400 --> 0:13:17.640 we as a firm sort of developed our own direct 0:13:17.679 --> 0:13:20.800 lending capability a couple of years ago. And I think 0:13:20.640 --> 0:13:22.560 the great benefit of that is again we sort of 0:13:22.559 --> 0:13:25.600 pride ourselves on being kind of financing our product agnostic. Right, 0:13:25.600 --> 0:13:27.520 we can do a traditional bank loan, we can do 0:13:27.600 --> 0:13:30.160 sort of a sort of you know, public execution and 0:13:30.240 --> 0:13:32.160 the public debt markets, or we can do a direct 0:13:32.200 --> 0:13:35.199 lending transaction sort of whatever best fits the company's objectives. 0:13:35.200 --> 0:13:36.120 We can sort of do it all. 0:13:36.320 --> 0:13:39.640 So let's talk about that, because you know, part of 0:13:39.679 --> 0:13:44.400 your job description is delivering a cohesive banking experience to 0:13:44.559 --> 0:13:48.240 fast growing companies. So the two different divisions that you're 0:13:48.679 --> 0:13:53.560 running head or cohed innovation Economy and specialized industries obviously 0:13:53.600 --> 0:13:57.480 have to work together. What other divisions at JP Morgan 0:13:57.600 --> 0:13:58.920 are you collaborating with? 0:13:59.080 --> 0:13:59.360 Sure? 0:13:59.840 --> 0:14:03.520 I would say just generally we collaborate across the firm 0:14:03.640 --> 0:14:06.319 and everything that we do. So the commercial bank is 0:14:06.440 --> 0:14:09.320 very broadly speaking, regardless of industry, regardless of what aspect 0:14:09.320 --> 0:14:11.720 of the commercial bank we're talking about. We're constantly working 0:14:11.760 --> 0:14:15.079 with our partners in the investment bank when companies need 0:14:15.160 --> 0:14:19.880 obviously excuse me, strategic capital raising M and a advisory 0:14:19.920 --> 0:14:21.960 whatever the case may be. So we're constantly kind of 0:14:22.000 --> 0:14:24.440 working in conjunction with one another. And at the same 0:14:24.480 --> 0:14:27.000 time we are often working with our asset management colleagues 0:14:27.000 --> 0:14:29.160 when companies have you know, large cash balances that they 0:14:29.200 --> 0:14:32.120 need to invest, and our private banking colleagues. And I 0:14:32.120 --> 0:14:35.320 think a good example of that is within the innovation 0:14:35.400 --> 0:14:40.000 economy kind of ecosystem overall, where because it is so interconnected. 0:14:40.040 --> 0:14:43.880 When you think about VC firms funding you know, portfolio companies, 0:14:44.080 --> 0:14:47.600 those portfolio companies having founders, they're oftentimes there repeat founders. 0:14:47.880 --> 0:14:50.360 It's important that you can serve sort of the needs 0:14:50.360 --> 0:14:53.320 of that entire, very interconnected ecosystem. 0:14:53.680 --> 0:14:54.840 So bankers on my. 0:14:54.880 --> 0:14:57.960 Team, on the Innovation Economy team are serving those portfolio 0:14:57.960 --> 0:15:00.680 companies right But at the same time we're working with 0:15:00.720 --> 0:15:03.600 our colleagues and asset management and the private bank who 0:15:03.640 --> 0:15:07.320 bank the VC firms themselves and bank the VC partners 0:15:07.360 --> 0:15:09.240 and the founders for their private wealth needs. 0:15:09.320 --> 0:15:11.120 So our objective is to deliver sort of. 0:15:11.080 --> 0:15:14.640 All the needs of the ecosystem, and that's why sort 0:15:14.640 --> 0:15:16.960 of by definition, we're always working across lines of business. 0:15:17.160 --> 0:15:20.480 So really what you're saying is from a checking account 0:15:21.080 --> 0:15:25.080 up to a secondary financing, private debt, up to an 0:15:25.160 --> 0:15:29.160 IPO and even beyond that if there's an acquisition or 0:15:29.160 --> 0:15:33.520 a merger. You guys are full service not only commercial bank, 0:15:33.560 --> 0:15:34.520 but investment bank. 0:15:34.840 --> 0:15:38.080 There really is in any space that you. 0:15:38.080 --> 0:15:43.320 Guys can't play in and service exactly what a fast 0:15:43.320 --> 0:15:44.840 growing startup needs exactly. 0:15:44.960 --> 0:15:47.760 You said it perfectly, and as I often like to say, 0:15:47.880 --> 0:15:50.680 we serve companies from startup to IPO and beyond, and 0:15:50.720 --> 0:15:53.280 so you know, again, we believe we're really one of 0:15:53.280 --> 0:15:55.800 the few firms who can actually serve every. 0:15:55.720 --> 0:15:58.640 Need of these companies. And again they're the founders themselves. 0:15:58.800 --> 0:16:00.280 Huh. Really really interesting thing. 0:16:00.800 --> 0:16:03.760 So let's talk a little bit about middle market banking. 0:16:04.360 --> 0:16:08.200 You referred earlier the definition of middle market banking as 0:16:08.480 --> 0:16:11.640 up to two billion in revenues. 0:16:11.200 --> 0:16:12.000 Top line running. 0:16:12.040 --> 0:16:14.920 So that's this is not a little These are not 0:16:15.080 --> 0:16:18.000 all little companies. That's a two billion in revenue is 0:16:18.000 --> 0:16:19.880 a pretty decent sized company. 0:16:19.720 --> 0:16:23.960 Absolutely, and again we have teams focused on the smaller size. 0:16:23.960 --> 0:16:25.200 What we call emerging middle market. 0:16:25.280 --> 0:16:26.760 So think about that's kind of twenty million to one 0:16:26.800 --> 0:16:29.560 hundred million in top line revenue, innovation economy doing the 0:16:29.640 --> 0:16:32.960 high growth, you know, VC backed startups, and then a 0:16:33.000 --> 0:16:36.160 bunch of different industries obviously within kind of that broader 0:16:36.160 --> 0:16:39.280 commercial banking universe and bankers that are focused simply on 0:16:39.280 --> 0:16:41.000 one hundred million and plus in top line. 0:16:40.840 --> 0:16:44.960 Revenue's that's really interesting. And we've talked earlier about the 0:16:45.040 --> 0:16:48.680 role of venture banking in this Where does that fit in, 0:16:48.720 --> 0:16:51.640 Where does venture capital fin into startups, and where does 0:16:52.480 --> 0:16:55.640 venture banking fit in as companies get a little. 0:16:55.480 --> 0:16:59.680 Larger generally speaking, And our objective is to really become 0:16:59.840 --> 0:17:03.400 the company's primary operating bank and trusted advisor from the 0:17:03.480 --> 0:17:06.120 very beginning, right, And so as an example of that, 0:17:06.160 --> 0:17:08.520 we now have a startup banking team that actually covers 0:17:08.520 --> 0:17:11.560 companies at pre seed and seed stage, so oftentime, could 0:17:11.640 --> 0:17:13.960 be before they've even raised an institutional. 0:17:13.560 --> 0:17:14.240 Round of capital. 0:17:15.080 --> 0:17:16.960 And at that point in time, their needs are very 0:17:17.000 --> 0:17:19.359 sort of simple, if you will, right, They need a 0:17:19.359 --> 0:17:21.360 bank account, they need to pay their employees, they need 0:17:21.359 --> 0:17:23.080 to have a way to sort of collect funds. They 0:17:23.119 --> 0:17:25.800 may need a credit card, just very simple banking needs, 0:17:26.119 --> 0:17:28.760 and then obviously as the companies you know continue to grow, 0:17:28.880 --> 0:17:31.960 those needs become more complex over time, including the need 0:17:32.000 --> 0:17:35.800 to either raise additional capital and whether that be from 0:17:36.000 --> 0:17:37.880 a venture capital fund or whoever that may. 0:17:38.119 --> 0:17:38.760 Be coming from. 0:17:39.400 --> 0:17:42.119 They may need some debt financing, and sort of on 0:17:42.200 --> 0:17:45.000 and on and on in terms of what they ultimately 0:17:45.040 --> 0:17:46.960 need to achieve their objectives and kind of become the 0:17:46.960 --> 0:17:48.000 company that they want to become. 0:17:48.400 --> 0:17:51.480 So what's the split between the companies you work with 0:17:51.520 --> 0:17:54.280 that are VC funded, that are private equity backed, or 0:17:54.840 --> 0:17:57.520 just bootstrapped by the founders themselves. 0:17:57.800 --> 0:17:59.800 So I would say again it very it would very 0:18:00.200 --> 0:18:02.879 significantly depending on the industries that we're talking about. But 0:18:02.880 --> 0:18:06.000 I if just we focus on the innovation economy business specifically, 0:18:06.440 --> 0:18:09.000 the vast majority of those are going to be VC backed. 0:18:09.560 --> 0:18:11.680 As I mentioned, of course, you know sort of the 0:18:12.000 --> 0:18:14.160 crossover if you will, between growth of equity and VC. 0:18:14.280 --> 0:18:16.359 The lines continue to get blurred, But I would say 0:18:16.359 --> 0:18:18.560 about twentysh percent of the business is sort of PE 0:18:18.600 --> 0:18:21.400 backed and the rest is VC back. Just brought broad numbers. 0:18:21.440 --> 0:18:23.320 Bootstrapping still goes on, or is that. 0:18:23.359 --> 0:18:24.000 It does again? 0:18:24.040 --> 0:18:26.760 And you see that you know, certainly at the sort 0:18:26.800 --> 0:18:28.560 of preceed and seed stage and then but I would 0:18:28.560 --> 0:18:31.440 say it's still it's a minority, right of the larger 0:18:31.480 --> 0:18:32.960 companies within the innovation economy. 0:18:33.200 --> 0:18:37.560 So I'm thinking about their balance sheet, what's the split 0:18:37.640 --> 0:18:40.280 between how much is equity, how much is debt or 0:18:40.359 --> 0:18:42.800 do you do a combination of debt and equity? 0:18:42.840 --> 0:18:44.600 What does this look like today? 0:18:44.680 --> 0:18:44.840 Yeah? 0:18:44.880 --> 0:18:48.840 No, absolutely so Again, the whole purpose of having a 0:18:48.880 --> 0:18:51.320 partner like JP Morgan is that a we can sort 0:18:51.320 --> 0:18:54.040 of help the companies think through what the optimal capital 0:18:54.080 --> 0:18:55.960 structure is and back to sort of the point of 0:18:56.000 --> 0:18:58.240 we're sort of product agnostic, depending on what the company 0:18:58.359 --> 0:19:01.360 choose to do. Most of these companies that are high 0:19:01.440 --> 0:19:04.040 growth VC backed in what we call the innovation economy 0:19:04.080 --> 0:19:06.680 business tend to still be pre profit, right. They're growing 0:19:06.720 --> 0:19:09.240 really rapidly. They're throwing everything back into the business in 0:19:09.320 --> 0:19:11.800 order to achieve scale. So for the most part, their 0:19:11.920 --> 0:19:14.960