Friday 27 April 2018

As a niche player in market, SVB will lend where others won't

Donal O'Donovan

Donal O'Donovan

SO, what is Ireland's new bank, and can it plug the lending gap for businesses?

First things first. Silicon Valley is a region in California, centred on Stanford University. Since the 1970s it has been the global capital of the technology sector, home to massive success stories like Apple, Google and Sun Microsystems, as well as thousands of small spin-out ventures all hoping to be the next big thing.

The region is rightly regarded as one of the world's great business stories -- not just because companies from there have done well, but because a huge proportion of the profits that pour back into the Valley every year are recycled back into new, often high-risk, technology ventures.

It means that, almost uniquely, the region has fostered a culture of taking calculated risks and thinking in new ways.

Silicon Valley Bank (SVB), which launched in Ireland yesterday, is the region's specialist lender, set up almost 30 years ago to provide banking services to businesses in the Valley. In its home market it acts just like any other bank -- taking deposits, making loans, managing company credit cards and providing trade financing.

Difference

The key difference is the niche it has carved out for itself, including lending to firms that in many cases have little income and even lower profits -- at least initially.

Most banks won't touch such companies, no matter how bright a future they might have.

The bank will lend where others won't because, as a niche player, executives say they understand their clients better, and are plugged into a web of relationships, with entrepreneurs, technologists and investors.

Half the US firms backed by venture capital firms are clients of the bank, which has $20bn (€15.7bn) in assets and $7bn out on loan. It has gone global over the past 30 years, following its clients into new markets in India and China, as well as the UK and Israel. But it remains a niche player and the Irish office will be just the seventh outside the US.

It may be niche but any new lender is welcome at this stage and may perhaps be a sign of things to come.

Irish Independent

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