It was a very bloody day for know-how firms when Greg Becker, then the chief govt of Silicon Valley Bank, appeared on CNBC in late August. The tech-heavy Nasdaq inventory index was down 2 per cent that session alone.
Yet Becker was his ordinary reassuring presence. The market correction would finally be wholesome for the sector, he reasoned. In the meantime, the financial institution’s steadiness sheet had by no means been stronger and it had an enviable document.
“We’ve been doing this, you know, for 30-plus years. So we’ve been through many cycles and I think we feel really good about our process,” he mentioned.
Last Friday, Becker appeared in an altogether completely different video — this time pleading with workers to carry on only a bit longer because the tech business’s dominant financial institution was sinking beneath the waves. “Can you guys just hang around, try to support each other, try to support our clients, work together, which may be a slightly better outcome than where we are right now?” he requested. By then, Becker had been ousted by federal regulators.
No financial institution paralleled the extraordinary rise of the trendy tech business fairly like SVB. Founded as a regional California lender in 1983, it turned a powerhouse, boasting by 2019 to have banked half of all venture-backed tech and life sciences firms within the US. Arguably, no banker personified that period like Becker, who, throughout a three-decade profession at SVB, helped it rise from being a junior lender to a pillar of the Valley and the tech economic system itself.
Some who know Becker and SVB’s management surprise what occurred behind the scenes earlier than the financial institution’s downfall. The US Department of Justice additionally needs solutions and has opened an investigation into the collapse.
Ultimately, an establishment that prided itself on being essentially the most subtle lender to the tech world was introduced down by one thing comparatively commonplace: its bond portfolio’s vulnerability to rising rates of interest. Becker didn’t reply to requests for remark.
People who know Becker have a tendency to explain him as honourable, stable and extremely pushed — extra an executor than a visionary. The avid bike owner has the lean physique of an endurance athlete and was recognized to get by on just some hours sleep at night time. As he rose via SVB’s ranks, he relied on an govt coach to enhance his empathy.
“He’s a very quick decision maker and decisive, which can be a strength and an Achilles heel,” mentioned one former SVB govt, who questioned if there was a sufficiently robust crew round Becker to problem him, notably on the financial institution’s administration of its bond portfolio.
This particular person additionally pointed to SVB’s speedy growth as a attainable seed of its demise. “Did they grow so quickly that they outgrew their people, including their chief executive?” the particular person requested.
Becker grew up in rural north-east Indiana, the place his household had a 300-acre farm. He joined Comerica, then a Detroit-based lender, after graduating from Indiana University with a enterprise diploma. Soon after relocating to its Bay Area department, he and one other younger colleague adopted their boss, Marc Verissimo, to SVB.
At the time, SVB, like different US industrial lenders, was fighting troubled actual property loans. It finally determined to shed such property and focus its assets on the burgeoning tech business.
One of the primary massive loans Becker made was $350,000 to a start-up networking firm that Cisco would purchase just a few months later for $100mn, he has recalled. In discussing his work, he tends to show a form of Midwestern earnestness.
“If you believe you have helped the company, you go home at night, you feel pretty darn good that you’ve made a difference in a company that’s changing something significant in the world,” Becker instructed Bloomberg Radio just a few years in the past.
By 1996, he had been despatched to open SVB’s workplace in Boulder, Colorado, after which returned to northern California just a few years later to steer its enterprise capital arm, the place he thrived. Cycling, it seems, was higher than golf to community with the Valley’s enterprise capital crowd. Becker and the SVB crew usually dominated a 100-mile annual charity race from Carmel to Hearst Castle — and in addition raised essentially the most cash.
Becker used SVB’s connections amongst Sonoma and Napa county vineyards to wine and dine tech barons. A premium wine lending arm was one unit the financial institution retained after it determined to shear off others and focus solely on tech.
In Becker’s personal telling, the bursting of the Nineties dotcom bubble was a formative occasion — for him and the financial institution. “I look back and some of my best relationships in the venture capital community were formed back in that time period, working through difficult situations because you had to,” he mentioned. That was in step with the mantra of Becker’s predecessor and mentor, Ken Wilcox: all the time put the consumer first.
In 2011, Becker turned chief govt of SVB and its father or mother firm, SVB Financial Group, whereas Wilcox left to ascertain a beachhead in China.
He strengthened the financial institution’s technique of signing up 1000’s of tech start-ups after which banking them — and their executives — as they progressed. “Bring them in early and support them all throughout their lifecycle” is how Becker described it.
One of the financial institution’s hallmarks was its willingness to point out leniency, offering a lifeline for a promising firm between funding rounds, even when its efficiency was rocky. That kind of dedication was extra in line with the Valley’s ethos than that of a staid lender. It gained SVB the allegiance of firm founders and enterprise capitalists, and warded off challengers from Wall Street.
In March 2020, when the Covid-19 pandemic struck, Becker gathered employees and promised he would assure their bonuses, it doesn’t matter what occurred. The concept, in response to one grateful SVB banker, was that with their very own funds safe, employees may focus completely on purchasers. Becker additionally realised that SVB’s vineyard prospects can be notably damage by journey restrictions and arrange a crew to assist. “People can say we cater to a bunch of elitists, but [it] showed how SVB’s spirit was our clients are first,” the banker mentioned.
While a lot of its fledgling purchasers inevitably failed, SVB can declare to have banked firms resembling Airbnb, Twitter and Uber, amongst others, from their earliest days. Grateful testimonials from founders are splattered throughout its web site.
But so immersed was SVB in a single neighborhood that it could have additionally led to confusion about its id. “We’re not bankers — we’re something more than bankers” is how the previous govt described the prevailing angle on the lender.
In 2021, US venture-backed firms raised a document $344.7bn. SVB’s deposits reached $189bn by the tip of that yr, up from $49bn on the finish of 2018, with a lot of it parked by tech firms flush with money from traders.
That started to reverse final yr as rates of interest shot up. The period of simple cash had come to an finish.
By January, issues had been mounting in SVB’s bond portfolio and dissenters had been questioning the financial institution’s prospects. “You could just feel it in the air by summer that things were just not right,” recalled one SVB banker, who didn’t view monetary acumen as considered one of Becker’s nice strengths. In an interview with the Financial Times, although, the chief govt was sanguine.
“The innovation economy has to have companies that fail or else they’re not innovating enough. So there will be more headlines in 2023 about failure rates and lay-offs,” Becker mentioned. “But that’s part of the cycle that tech and life science companies go through. So none of us should be surprised.”
Additional reporting by Tabby Kinder in San Francisco