At Silicon Valley Bank, risky tech startups are lucrative business

http://www.latimes.com/business/la-fi-silicon-valley-bank-20150807-story.html#page=1

by shahryc • 11 years ago

34 11 11 years ago

shahryc2• 11 years ago

"The bank is aggressive in courting investors as well, part of why it has become the 'first call' bank for many of them, said James Slavet, a Menlo Park, Calif., venture investor with Greycroft Partners."

shahryc2• 11 years ago

I think the Fed's easy money policy of low-interest rates prop institutional investors to park money with VCs for higher returns --- the combination of low-interest rates & lots of money in the valley enable SVB to capitalize on start-ups, unlike other banks. Curious to know if it was the same during the dot-com bubble

marincounty• 11 years ago

I recall Greenspan keeping it, and always talking about increases, around 4-6%? He was always warning us of "irrational exuberance". People were investing like it would never go down. The biggest idiot at the party was making a killing in the stock market, and bragging about it. The professionals(stock, financial advisors) were basically telling everyone, "If you are not in the stock market; there's something wrong with you(you're an idiot?).

Well the bubble collapsed! I remember a Game Developer came into some money(his company was bought by EA.), I believe put his $500,000 into the stock market--one year before the crash. I believe he lost everything? I never asked, but I know that was a lot of money for this guy. He came from a family that was always struggling financially.

I am tired of the low interest rates on a personal level. On a completely selfish level, this recovery has not helped me in the slightest. I don't invest. Any profit I make on money is my hard work(hustling--buying and selling stuff), and I have always relied on the interest of CD's. The return on CD's has been close to 0 for years now. The only reason I keep money in the bank is because I don't want to bury it, and forget where I buried it! I know relying on the income from CD's is not savvy, but it's save, and that's literally how most poor people invest.

I got off base, but this free money I can't get for various reasons. Where I live homes/rent have skyrocketed. Too many people are paying their whole pay check for rent. It's not how much you make anymore; It's how much does it cost to put a roof over your head? People ask why do Developers make so much in the Bay Area? If not because they are Rock Star Programmers. It's because the employer knows how expensive it is to live here, and they don't want to live in Findlay, Ohio. (I happen to love the Midwest, and see the charm.)

I won't speculate if we're in a bubble, but this economy has not helped my particular economic situation. I do feel the rich have all the access to the very low interest rates, maybe they always did? My wish is the government didn't allow anyone entity buy more two realestate investments. Foreigners should be banned immediately from buying realestate if they are not citizens first. Maybe it would not work in the end, but I just don't like to see the extreme speculation in realestate we're seeing now. It's not so easy to move because your rent went up $750 a month. There's kids in school. There's a lot of factors. I guess when your young it's easy to pick up and move?

I don't know what to do, but I would like to see Janet Yellen raise interest rates, or do away with Dodd Frank Act? That's the reason why banks only lend to the people who don't really need the money? I know a lot of rich dudes, and they don't start business with the free money; they basically buy realestate and gamble in the stock market. The money is not trickling down.

danieltillett• 11 years ago

I find it interesting that you are asking for regulation to be done away with (i.e. Dodd Frank) while at the same time asking for a massive new set of regulation to be placed on real estate investments.

If you want to solve speculation in real estate start looking at land taxes. Of course since land taxes can’t be avoided and will mainly be paid for by the rich and powerful they are none too popular.

thedogeye• 11 years ago

James Slavet is at Greylock not Greycroft

rmason• 11 years ago

You would think the CEO Becker had heard enough dubious business pitches that later proved wildly successful that he would have enough common sense as to not brand Uber's plan as 'insane'.

screwedup2• 11 years ago

the bank has outperformed bigger rivals, not just by lending to fledgling firms but by taking small ownership stakes in them to help offset their higher risks

Doesn't taking equity in a company that you've already loaned money to _increase_ your risk, not offset it? Am I not understanding what's going on?

nikanj• 11 years ago

Your downside risk remains the same (lose loaned money), but your upside gains increase substantially (interest vs interest+acquisition/ipo income). Thus the risk becomes more tolerable.

seizethecheese• 11 years ago

Surely the quote is talking about average risk. Yeah, adding amy investment to a portfolio will increase overall risk, but debt in startups is a lot riskier than equity since most fail and debt caps your upside.

fraserharris• 11 years ago

The warrants are stock options - free to be given. SVB is not paying for them. It increases their potential upside beyond the interest rate. Across a portfolio it makes up for defaults.

screwedup2• 11 years ago

Unless your whole portfolio is correlated...

At Silicon Valley Bank, risky tech startups are lucrative business

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