It was a particularly bloody day for technology companies when then-Silicon Valley Bank Chief Executive Greg Baker appeared on CNBC in late August. The tech-heavy Nasdaq stock index was down 2 percent in that session alone.
Yet Baker was his usual reassuring presence. A market correction will ultimately be healthy for the sector, he reasoned. Meanwhile, the bank’s balance sheet was never strong and it had an enviable track record.
“We’ve been doing this, you know, for over 30 years. So we’ve gone through several cycles and I think we feel really good about our process,” he said.
Last Friday, Baker appeared in an entirely different video — this time urging employees to hold on a little longer as the tech industry’s dominant bank sank under the waves. “Can you guys just hang on, try to support each other, try to support our customers, work together, which might be a little better outcome than where we are now?” he asked. By then, Baker had been ousted by federal regulators.
No bank has matched the phenomenal rise of the modern tech industry like SVB. Founded in 1983 as a regional California lender, it became a powerhouse, banking half of all venture-backed tech and life sciences companies in the US by 2019. Arguably, no banker epitomized that era like Becker, who, during a three-decade career at SVB, helped transform it from a junior lender to a pillar of the Valley and tech economy.
Some who know Becker and SVB’s leadership wonder what happened behind the scenes before the bank’s collapse. The US Department of Justice also wants answers and has launched an investigation into the collapse.
A queue outside Silicon Valley Bank’s offices in Santa Clara, California, after its collapse © Justin Sullivan/Getty Images
Ultimately, an institution that prided itself on being one of the most sophisticated lenders in the tech world was brought down by something relatively simple: the vulnerability of its bond portfolio to rising interest rates. Baker did not respond to requests for comment.
Those who know Baker describe him as honorable, solid and highly motivated – more of an administrator than a visionary. The avid cyclist had the lean physique of an endurance athlete and was known to get only a few hours of sleep a night. As he rose through the ranks of the SVB, he relied on an executive coach to improve his empathy.
“He is a very quick decision-maker and decisive, which can be a strength and an Achilles’ heel,” said one former SVB executive, who wondered if Becker had a strong enough team around him to challenge him, particularly the bank’s handling of its bonds. on. portfolio
The man also pointed to SVB’s rapid expansion as a possible seed of its demise. “Did they grow so fast that they outgrew their people, including their chief executive?” the person asked.
Baker grew up in rural northeast Indiana, where his family owned a 300-acre farm. After graduating from Indiana University with a business degree, he joined Detroit-based lender Comerica. Soon after moving to its Bay Area branch, he and another young colleague followed their boss, Mark Verissimo, to SVB.
At the time, SVB, like other US commercial lenders, was struggling with troubled real estate loans. It eventually decided to offload such assets and focus its resources on the growing tech industry.
One of the first big loans Baker made was $350,000 to a start-up networking company that Cisco would buy a few months later for $100mn, he recalled. In discussing his work, he tends to show a kind of Midwestern allegiance.
“If you think you’ve helped a company, you go home at night feeling great that you’ve made a difference in a company that’s changing something significant in the world,” Baker told Bloomberg Radio a few years ago.
By 1996, he was sent to open SVB’s office in Boulder, Colorado, and a few years later returned to Northern California to head up venture capital, where he prospered. It turns out, the valley was better than golf for networking with the venture capital crowd. Baker and the SVB team often dominated the annual 100-mile charity race from Carmel to Hearst Castle – and also raised the most money.
Baker used SVB’s connections between Sonoma and Napa County vineyards to court wine and tech barons. The premium wine lending arm was a unit retained after the bank decided to divest others and focus solely on tech.
By Baker’s own account, the bursting of the dotcom bubble of the 1990s was a formative event for him and the bank. “I look back and some of my best relationships in the venture capital community were formed back in that period, working in difficult situations because you had to,” he said. It was consistent with the mantra of Baker’s predecessor and mentor Ken Wilcox: always put the client first.
In 2011, Becker became chief executive of SVB and its parent company, SVB Financial Group, while Wilcox left to set up a beachhead in China.
He built a strategy of signing up thousands of tech start-ups and then bankrolling them — and their executives — as they progressed. “Bring them in early and support them throughout their lifecycle” is how Baker describes it.
Becker became chief executive of SVB and its parent company SVB Financial Group in 2011 © David Wilder/Bloomberg
One of the bank’s hallmarks was its willingness to show generosity, providing a lifeline for a promising company between funding rounds, even if its performance was rocky. This kind of commitment was more in keeping with the policy of the Valley than a stable lender. He won SVB the loyalty of company founders and venture capitalists and fended off Wall Street challenges.
In March 2020, when the Covid-19 pandemic hit, Baker rallied staff and promised they would guarantee their bonuses no matter what. According to one grateful SVB banker, the idea was that with their own financial security, staff could focus entirely on clients. Baker also realized that SVB’s winery customers would be particularly hurt by the travel restrictions and formed a team to help. “People might say we cater to an elite group, but [it] The spirit of SVB shows that our customers come first,” said the banker.
While many of its new clients inevitably failed, SVB can claim to have banked companies like Airbnb, Twitter and Uber from their early days. Grateful testimonials from founders are sprinkled on its website.
But SVB was so immersed in the same community that it could even lead to confusion about its identity. “We’re not bankers – we’re more than bankers,” a former executive described the prevailing attitude at the lender.
In 2021, US venture-backed companies raised a record $344.7bn. SVB’s deposits reached $189bn by the end of that year, up from $49bn at the end of 2018, mostly flushed with investor cash by tech companies.
That started to reverse last year as interest rates rose. The era of easy money was over.
By January, problems were mounting with SVB’s bond portfolio and dissenters were questioning the bank’s prospects. “You could feel in the air by summer that things just weren’t right,” recalls one SVB banker, who didn’t see financial acumen as one of Becker’s greatest strengths. In an interview with the Financial Times, however, the chief executive was coy.
“In an innovation economy there must be companies that fail or cannot innovate enough. So in 2023 there will be more headlines about failure rates and layoffs,” Baker said. “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
