Gaule: Can you give us an introduction to Wells Fargo Technology and Venture Banking Group?
Weeks: We are a specialty banking division that addresses the unique needs of technology, cleantech and life science companies from early stage to mature public and private companies.
Growing technology companies encounter a global market and operational challenges that require sophisticated services and expertise. Wells Fargo delivers this expertise throughout the tech community. In fact we have business relationships with over 75% of the Silicon Valley 150. My job in the venture capital group is to work with venture capital firms delivering a variety of services to their funds and management companies.
In addition, I am a conduit for their portfolio companies into the 80 lines of business and services Wells Fargo offers their clients.
Gaule: What trends in technology and business models are you seeing at the moment?
Weeks: Clearly, the electronic payment space is very active right now with hundreds of millions of dollars being invested across the payment spectrum. Some of these companies are either designed to make payments as frictionless as possible, like Square, Stripe and PayNearMe. Others help merchants accept payments more seamlessly within their business model, such as Uber, Lyft or Homejoy. The influx of deals in the payment sector has also resulted in great deal of investing in security and mobile applications to allow transactions to be completed safely and conveniently.
The investment model has not changed per se; however, we have seen a huge reduction in the number of active venture firms from the peak in 2000. That said, many of the traditional venture firms have been replaced by very sophisticated angel investors and incubators.
The venture funds that are active are well positioned with capital and have strong deal flow. In addition, there are a number of other types of investment vehicles that are extremely active. They include growth equity, private equity, hedge, corporates and strategics focused on late investing. Consequently, a successful startup has plenty of capital available to support the entire growth cycle. As a result we now have a large number of private companies that have valuations in excess of $1bn.
Gaule: What is the role of corporate investors in partnering with venture investors and startups?
Weeks: We have seen the number of corporate investors ebb and flow over the past 25 years in relation to the success of venture capital firms and startups. As the technology community heats up, many corporate investors rush in looking for ways to partner and invest.
There are some like Intel that have been very consistent in their investing appetite and have been a value added investor consistently for many years. Cisco was incredibly active for a number of years and now we see Google investing and acquiring companies on a regular basis. I think Cisco then and Google now both invest strategically, but also have a very clear vision of acquiring top talent as part of their investment/acquisition philosophy.
Most corporate investors are much more focused on strategic investing. I think they can help startup companies a great deal if the fit is right. The absorption of new technology is so rapid today that startups can go from no revenue to billion dollar companies with global presence over just a few years. The right multinational corporate investor can help with this rapid growth, particularly with overcoming challenges in foreign countries where they have dealt with some of the nuances in those countries.
I think the successful corporate investor today is bringing a lot more than just capital. It is important for them to have a clear mission on what they are hoping to achieve in both up and down cycles.
Gaule: How is Silicon Valley changing?
Weeks: The amazing thing about the Valley that has not changed since I started working with startups and venture firms in 1985 is the constant flow of great entrepreneurs at all levels from entry level engineers to best of breed C level executives. Every time it seems that they Valley may be losing its dominance another Intel, Apple, Cisco, Google, Nest, Facebook or WhatsApp comes along and the startup fever picks right back up.
What is interesting about the current expansion is the spread of the Valley. Traditionally the majority of the startups ran between Highway 92 in San Mateo and San Jose. This time we are seeing huge growth in San Francisco (approximately 2,000 startups since 2008) as well pushing out in other parts of the Bay Area.
All in all, the resilience of the entrepreneur is amazing through all cycles good and bad. They are always willing to try to start another company and quickly move to the next hot area. It is very difficult for areas outside the Bay Area to compete for this talent. Particularly because the economic cost of re-entry back to the bay area is so prohibitive.
Gaule: What are some interesting companies that the technology group has worked with recently?
Weeks: Our goal is to establish deep relationships with our clients. Consequently, as a tech company grows from startup to $1bn or more enterprise we bring a wealth of resources to help their trajectory.
Recently we helped two companies that are growing very rapidly. The first is a software company with revenues that are growing over 200% year over year. We recently put in place a large credit facility that will aid their pursuit of short and long term growth goals by providing flexible access to significant amounts of capital.
The second is a hardware and software company with revenues that have grown past $1bn. We are the lead arranger on a $600m syndicated credit facility, which is comprised of a $300m term loan A and $300 million revolving line of credit. Proceeds were used to refinance the company’s existing term loan B, which was used to finance a large acquisition.
In addition to the lines of credit for these companies we are also working with them on their domestic and foreign operations including F/X and treasury systems. In addition, Wells Fargo Securities is in dialogue with them, as well as our private banking teams which have very sophisticated products focused on helping entrepreneurs make crucial planning and execution strategies with their stock options and restricted stock.
Gaule: What are the best deals you have worked on and which one did you miss?
Weeks: One of the best is also one I almost missed. I was asked to do line of credit for an early leader in internet space. The future of the internet was still way too early to call; in fact Bill Gates was stating at the time that the whole internet opportunity was being way overblown.
As part of my due diligence on pursuing the lending opportunity I placed a call to the lead investor, a highly respected and very successful VC. During the call I expressed my opinion that perhaps the internet was a lot of hype and may not lead to much and I supported my statement with reference to Bill Gates’ statements.
Fortunately, this investor patiently and kindly explained that I had no idea what I was talking about and if I was smart I would pursue the loan opportunity aggressively. I ended up taking his advice and it turned out to be a big winner.
One I did miss started one evening some years ago when I met with the founders of what turned out to be one of the e-commerce leaders.
They proceeded to tell how there was a huge market appetite for a website that would allow for the exchange of goods online among average people who were anxious to buy and sell things like Pez dispensers and beanie babies. I had no appreciation for this market (along with a lot of very smart investors) and missed this opportunity.
Gaule: What are your interests outside of the office?
Weeks: Weekends generally consist of attending my son’s baseball games and my daughter’s soccer games. They both play year round, so we are generally on the go most weekends. [Also] when we can we sneak ski and backpacking trips.
Another strong interest of mine is motorcycles. As it turns out, there a good number of VC’s and entrepreneurs who share my passion for performance motorcycles. 15 years ago we started doing group rides one or twice a year. It evolved into 3 or 4 trips a year with anywhere from five to 10 guys on each trip. We have seen a great deal of California from the seat of motorcycle over the years. Lots of fun and a great way to network.
– Photo courtesy of Barata Feio courtesy of Wikimedia Commons
To contact Andrew Gaule and for future interview ideas, email andy@roscahill.com and Toby Lewis at tlewis@globalcorporateventuring.com.