A lot can change in a few weeks.
In early March, it was business as usual for the venture banking division at Silicon Valley Bank. Then their world was turned upside down. And in the weeks since SVB imploded and was acquired by North Carolina-based First Citizens, there’s been a steady exodus of talent. Among the first to depart: Jake Moseley, Ted Wilson, and Matt Trotter, who left to join St. Louis-based financial services firm Stifel as venture banking managing directors based in San Francisco. The former head of tech corporate banking at SVB, Chris Stedman, joined Stifel in April as a managing director. Former head of health care and technology David Sabow and a slew of bankers on his team recently left for HSBC, taking on commercial banking roles in tech and healthcare.
Yesterday, I caught up with Moseley and Trotter, as well as Stifel Bank CEO Chris Reichert, to discuss the transition from SVB, how the venture lending market is changing, and how Stifel will compete to fill the void left by SVB.
“For both me and Jake, to be honest, the last handful of weeks have been quite emotional,” said Matt Trotter. “I'd been at SVB for 17 years and it was one of those things where everything changed quite abruptly."
On Friday, March 10, when the FDIC took over SVB, Trotter realized he and his colleagues were at an impasse. Employees received an email notifying them they were no longer working for SVB and could stay on to work with the FDIC-run entity for 45 days. “It was very hard,” said Trotter. “I think that we had the realization that likely SVB was not going to be the same as it ever was again and me, Jake, and Ted wanted to go find a platform that we could help build and grow their existing practice,” he added.
The team looked for a new home base with a track record in venture lending and a diversified business model. Stifel, in addition to its venture lending business, also has robust wealth management and investment banking divisions—which Moseley explained were the other “legs of the stool” that SVB had been trying to build. “The commercial banking opportunity in this space fits with those two other business lines very nicely,” said Moseley. “We felt like we could benefit both in terms of referrals coming in from those groups, but also the ability to broadly serve this entrepreneurial ecosystem in a way that was unique and specific.” Stifel has about $5 billion in outstanding loans across its venture lending and fund commitment verticals, according to a spokesperson for the company.
Another crucial step to vetting an employer after living through the bank run? Checking out its financial health. “We looked closely at the balance sheet [of Stifel], something that we had not done before. We looked at the tier one capital ratios and the uninsured deposit ratios to make sure that this was the kind of a place that we could join,” said Trotter.
These days clients, too, are running due diligence on their lenders—one of many changes in venture lending since SVB. “On the financial stability side, that was a nonissue prior to six weeks ago. It was just never brought up, but today it’s absolutely the number one priority on entrepreneurs' minds,” said Moseley. Though a close second has to be costs: “In a world where banking is going to be more diversified and the cost of capital is going to be higher, I think the cost of lending will go up,” said Trotter.
As for whether their client relationships are intact, bringing over clients to Stifel is a work in progress. “We’re still in the early days,” said Moseley. However, the opening in market share has certainly created opportunities for firms like Stifel to find their niche in the venture banking ecosystem, which was previously monopolized by SVB. “It was tougher to compete with SVB back in the day at earlier stages, and so I think with this market dislocation there’s an opportunity for us to focus on serving those earlier stage venture backed companies in a more material way,” said Moseley.
Not to mention the opportunity that firms like Stifel and HSBC had to poach bankers after SVB’s collapse. “During our expansion of venture banking over the last five years, we were pretty intimidated by the market share leader SVB,” said Reichert. “If you'd asked me 60 days ago, what it would be like to have partners like Jake and Matt as part of our team, I would have been overjoyed.”
Now, with the venture banking juggernaut at SVB dispersing, the competition for market share will be a real race.
See you tomorrow,
Jackson Fordyce curated the deals section of today’s newsletter.