Bring the Valley’s funding model to the UK’s tech industry
“We’re a bank and we’re proud to be a bank!” shouts Oscar Jazdowski, head of origination at Silicon Valley Bank, banging his fists on the table with an almighty thump.
We’re in a boardroom at 41 Lothbury, around the corner from the Bank of England, deep in the heart of London’s financial district. To see a high-profile banking boss slamming his fists in a meeting probably isn’t a rarity during these dark, economic times.
But it’s not anger propelling Jazdowski’s limbs, it’s passion.
Silicon Valley Bank (SVB) has been servicing the technology sector in the States for some 30 years. It moved to the UK in 2004 offering a number of loans to UK companies but it wasn’t until June 2012 that the bank received the banking licence it needed to offer full banking services.
Since launch the bank has signed up 100 new clients including Moshi Monster creator Mind Candy and Fin-Tech heavyweights Monetise. Jazdowski and SVB are on a mission – to improve the tech start-up ecosystem and ingrain SVB as the dedicated bank for London’s innovators.
“We have got to re-educate the UK banking industry,” he says. “We are not a manufacturing based economy, our assets are no longer equipment and fixtures. We have moved to a knowledge based economy where people, innovation and IP [intellectual property]are the assets – it’s a problem that banks are facing and they haven’t grasped it yet.”
Jazdowski has heard many entrepreneurs lament the fact that banks are demanding homes as collateral instead the thing that innovative young companies have in abundance– IP.
SVB is known as a bank for the technology scene (the clue is in the name) but technology as we all know is a fairly lose term. When taking on new clients, the bank looks for innovation as a key factor.
“What has held us safe as a bank for 30 years in what appears to be a risky sector is two things,” he explains. “The quality of the investors we work with who do what they can to support these young companies and make them successful – and the IP.
“Even if a company fails, if it has created some kind of innovation then somebody in the global tech world, Google, IBM, HP etc., will come and buy the IP for pocket change – a couple of million.
“With this in mind we have to change the mind-set of the UK banks – I may be arguing against myself here but if the other banks become more active in this sector, the ecosystem will grow and it will benefit us and the economy.”
With the move from Mayfair to the City, SVB made a statement of intent. It wants to straddle all of the echelons of technology companies. The early stage start-ups, the growth stage companies, the big boys and the VC’s and other investors.
“Fortunately this year our loans have more than doubled, a lot of that is coming from the growth stage companies. We provide traditional banking services, working capital, lines of credit and acquisition financing,” he explains.
“The challenge is twofold though – access to capital and access to talent.”
While the bank won’t simply plough money into start-ups, if a young company comes with a large VC or angel funding round – it will put some debt financing on top of the equity.
Jazdowski lives and breathes the technology scene. His knowledge of the UK technology scene is vast and he isn’t backwards about coming forwards in both his praise and concerns.
“The London scene for technology is fantastic because the ecosystem continues to grow and flourish,” he beams. “The challenge is twofold though – access to capital and access to talent. We have to be very careful of the ecosystem here to make sure there is enough talent to keep all of these companies setting up – at the end of the day if you can’t find talent, you’ll set up elsewhere.”
The bank is keen to get involved in the cultivation of talent. The spirited face of the bank sitting across from me speaks of talking to educational authorities to see what SVB can do to encourage children into the sector.
“In Ireland they started Coded Dojo which has become a worldwide phenomenon in teaching kids to code, I’m a big believer the more we educate the better off we will be. We are living in a generation of kids who have grown up in a digital world. We have to think about the opportunities of this going forward.”
I wonder if he has any thoughts on what government could do to help the technology scene to flourish further.
“The government has done a great job of listening and trying to create solutions for the industry like tax incentives but there are two issues that are hot in my mind at the moment.
“One is going public. UK companies like Mind Candy and Shazam are good candidates to go public but naturally they tend to focus on NASDAQ in the US. We need to make the LSE and AIM more attractive to UK companies to list and educate the City as to why investors want to buy technology stocks,” he says.
It’s a cry you can hear from many technology analysts, we spoke to Tudor Aw, a technology expert at KPMG and he made the same argument. By all accounts it’s something is being addressed by many – something Jazdowski is glad to see. But he’s not finished yet.
“The other thing I’ve noticed is that in Shoreditch you can find an incubator workspace for a small start-up easily but the challenge is in the next stage,” he argues.
“When entrepreneurs go and see landlords they want huge deposits for smaller spaces. We need to educate the landlord community to be more accepting of growing start-ups. In the US some landlords take equity in the company – this could work here too.”
It’s clear that Jazdowski and SVB are intent on providing more than just current accounts to the technology scene. The recent news that Bindi Karia, the face of Microsoft’s start-up programme BizSpark, is to join SVB gives some idea of what the bank might have planned in the New Year.
“We want to use Bindi as a catalyst to get more companies into the SVB network,” he says.
“In the US we introduce our early stage companies to large corporates. A lot of them are dying for innovation the entrepreneurs would love global companies interested in their products. We don’t have this level of intermingling in the UK – it’s one of the ways we want to demonstrate our position in the market here in 2013 – by bringing these companies together.”
It’s not like we don’t have the bog global giants present here in London. We have Google, Microsoft, IBM and Facebook etc. but do we have our own home grown behemoths? I put this to Jazdowski – how can we get our start-ups scaling up rather than selling out?
“It’s human nature. When you’ve started a company, had modest success and someone offers you £3m – it’s difficult to turn down,” he answers frankly.
“What has to happen for us to be able to grow these larger companies is for investors to give management of these companies a safety net,” he offers.
“If they see an entrepreneurial team growing a successful business you say ‘listen – sell me some of your shares in the business and we’ll give you enough money to pay off your mortgage, take care of your kids’ education and buy a summer home in Portugal’ – the entrepreneur goes away with some liquidity and the desire to continue growing the business further.”
It’s an entirely lucid plan and one that might just work. I have the feeling that Oscar Jazdowski will repeat it,
along with his other suggestions to anyone with clout who can listen and get these wheels in motion.
We know SVB and Jazdowski ultimately want and need to increase their footing in London and the UK, bag more clients, sell more services. But there appears to be a genuine sense of wanting this technology eco-system of ours to keep growing.
That would be for the benefit of all of us. And worth slamming your fists on the table.