Scott Chamberlin | Customers Bank

Scott Chamberlin | Customers Bank

[00:00:00] Welcome to the Amplified CEO with VC and serial entrepreneur, Richard Stroupe with today's guest, Scott Chamberlin. With over 25 years of banking experience from Silicon Valley to Toronto and Boston, he is now in Wilmington, North Carolina as the managing director of Venture Capital relationships at Customers Bank.

Scott, welcome. Thank you. Thanks for having me. No, thank you for stopping by. I really appreciate your time today. Absolutely. Tell me a little bit about yourself, your background introduction and what you do at Customers Bank. Yeah, I'm new to the area, new to the Wilmington area. I've been with Customers Bank since early part of last year.

Um, I joined customers to lead sponsor coverage for the East Coast, which means on any given day I spend about 80% of my time calling on venture capitalists. some private equity. then the balance of my time is spent with working with early stage companies. I've been in the early stage space for I guess about 25 years.

Um, I'm a [00:01:00] Californian native, grew up in Southern California as well as Northern California. Mm-hmm. Um, in my business career, I started off with GE Capital in the nineties where I kind of got a taste of working with technology companies, albeit on kinda the later stage side. And then I joined Silicon Valley Bank in the.com era.

Um, started with them in southern California, then ultimately moved to their headquarters. I think that was in 2002. So kind of the, the, the depths of the.com era. Mm-hmm. I left SVB in, in early 2004 and joined a startup bank. Bridge Bank. It was about 300 million in assets at the time.

Um, and joined them with some folks I used to work with at Silicon Valley Bank. We grew that practice out, and then ultimately we launched the technology practice, uh, for a Bridge Bank back in 2005. I did that with a colleague, um, which was interesting to do a startup startup bank. Um, it was about a $400 million bank, uh, in asset size.

And we started that group right around the same time that Score one bank started. Mm-hmm. Um, score [00:02:00] one bank. Um, if you recall that timeline opened with a lot of fanfare, hired a lot of people, raised a hundred million dollars, opened offices across the country. I. And I'm sitting in my chair in Palo Alto, and if you know the Bay Area, um, we put the group in Palo Alto for a variety of political reasons.

Mm-hmm. My person who started the group with me, uh, we were both East Bay people, so we would kind of make our journey over six freeways in a bridge to Palo Alto every morning. And we, we built that group from scratch. Um, and it was probably one of the, the hardest things I've ever had to do, but probably one of the most rewarding.

 uh, ultimately moved to Boston, uh, for personal reasons and had the idea that a bank, I mean SVB obviously at the time, this was back in 2013. Um, was the dominant player in this space, right? Mm-hmm. So I had this premise that there should be a locally based bank that does some similar things to an SVB, because Boston being a very provincial area, right?

So I went around and, and talked to as many bank CEOs, as [00:03:00] possible who would talk to me. And, and the CEOs love the idea, right? Because why they're interested in tech working with technology companies is, is on the depository angle, right? Mm-hmm. There are excess deposits with, with tech companies that the, that the bank and then lend out cheaply to other assets on the balance sheet like real estate.

Mm-hmm. So ultimately, I, I started a tech practice in Boston by the name of Cambridge Trust, and again, kind of a slow growth, um, but very focused on the New England market. So we grew that out over six, seven years. And then I took some time off, um, through Covid, uh, moved to Toronto of all places, um, and was working with East West Bank to develop a tech practice for them.

and then ultimately joined customers bank in, uh, like I said, may of last year to, to lead our sponsor coverage. It's a wonderful journey from California to Boston to Toronto now to Right. To Wilmington. Right. So what brought you to Wilmington? So we had, so our kids are [00:04:00] at an age, they're either in college or out of college.

Mm-hmm. So we, we needed to get back, I needed to get back to the states for my job. Mm. And we had really three criteria to, to move here or to move. We could live anywhere right. At, at this point in our lives. And we wanted better weather. We wanted to be outta the snow. we wanted an airport, um, to commute and we wanted to be in a technology center, so we chose Raleigh.

Mm-hmm. And, you know, here we are in, in the Wilmington area. we decided we would rent for a year just to kind of get our bearings and ended up of all places Carolina Beach and fell in love with it, and it ended up staying. So we are, full-time residents here, and very much look forward to helping the tech ecosystem develop from here.

It's amazing since I started this podcast and, and you know, obviously in the Wilmington market, you're kind of limited to who. Mm-hmm. You could invite onto the podcast, you know, in person. Mm-hmm. We are thinking about doing some things remotely, but it's, it's amazing to have such wonderful professionals such as [00:05:00] yourself in this little tiny market, there's, there's a lot of people that are, that are moving either to Wilmington, like you said, Carolina Beach even to, to Surf City's.

Mm-hmm. It's a, it's an up and coming area. North Carolina's always been kind of the, under the radar. Market. But it's, it's, it's really refreshing to see how folks are now embracing that. Yeah. I mean, it's a, it's a fantastic area. I mean, we, we, you know, growing up in Southern California, being close to the ocean.

Mm-hmm. I mean, that's clearly a draw. I mean, the weather's great. The people are great. I mean, this is my first time living in the South and it's been a remarkable experience. Mm-hmm. We absolutely love it here. So, um, I mean, this is, you know, when you find places that, that, check all the boxes, right? I mean, you know, the only challenge is, is, you know, I fly up and down the East Coast and I.

The Wilmington airport, while it's amazing, is also limiting in the sense of, you know, if y'all wanna go to Nashville, I've gotta go through Charlotte or Atlanta, but mm-hmm. Other than that, if that's the only thing I can complain about, I think life is good. Absolutely. [00:06:00] Have you made it up to the high country in North Carolina yet?

I have not, no. It, it's interesting. We've, we've spent so much time down by the beach and, and because we live on an island, sometimes it feels like living on an island and it's like mm-hmm. You have to make that effort to, to, uh, to go different places. But I think this fall, our plan is to, to make it to some of those areas.

Yeah. You definitely have to check out Boone mm-hmm. And blowing rock and, yeah. Um, Benner Elk, I went, I went to school at Appalachian State. Oh, nice. So I spent a lot of time in the high country. It's, it's really nice. Very beautiful. Awesome. And it's an up and coming entrepreneurial area. Oh, is it really?

Okay. Yeah. I mean, app State has a pretty good, you know, system where they're, they're supporting startups, from the students coming out of there. Yeah. Love to learn more. you said you're, you said Kure Beach or Carolina Beach? I am, uh, my mail. It's a funny question. My mailing address is Carolina Beach.

Okay. I live in Kure Beach. Okay. And then I still have, it's been explained to me the differences. Mm-hmm. And I just, I mean, but we're right on the right on the dividing line. Okay. So have you, have you made it to [00:07:00] Britts Donuts yet? Of course. Britts is, uh, opened two weeks ago. Yeah. Um, everybody knows Britts and we, we got half a dozen donuts, . So, um, now they're open, not, not full-time yet. Right. But, uh, yeah, it's great. Yeah. I actually tried to buy Britts. Oh, did you really? Several years ago. Yeah. I'm surprised they haven't licensed that I know out.

And amazing that they can do that type of business with one product. I think we went on a Saturday or Sunday morning and I think we, we waited an hour. Oh my gosh. So we went, we went over to Gulfstream, had breakfast, came back, still waited and picked up the donuts from there. So yeah, that's, that not sound Sounds about right.

Especially in the summertime. Oh yeah, exactly. With the, with the carnival there's always a a line Yeah. The donuts. So what is venture banking or tech tech lending for what you do? Yeah, so, so venture banking, tech lending, sort of terms that are kind of, kind of melded together, I guess. Um, tech lending to my definition is [00:08:00] really lending to companies that are pre profit and oftentimes pre-revenue.

Mm-hmm. And that really separates what I call tech banks or banks with tech practices from just standard commercial banks. Now Customers Bank is a commercial bank that does a variety of things, including tech banking. Mm-hmm. In tech banking, where we specialize at customers is within venture lending.

Right. So, you know, what is venture lending? Basically lending to companies that are, uh, our definition is kinda late or robust seed round series A. So let, for example, purposes company raises $10 million, um, in a series A from, from investors. Mm-hmm. We're comfortable with or, or want to get to know, and they say, well that capital's gonna take us out, call it 18 months.

Mm-hmm. Um, if they layer in venture debt, let's call it, you know, historical rule of thumb, you know, 25, 30% of a recent equity round mm-hmm. Um, can be, uh, taken as far as venture debt. So if, if the 10 million will get a company 18 months, maybe adding on some venture debt attached to that maybe gets a [00:09:00] company another six months of runway.

Mm-hmm. In theory, increasing the valuation, um, giving company more time to, you know, obviously increase sales, increase its enterprise value, uh, for the next round. Okay. And do you usually partner with venture capitalists or private equity groups who are making these strategic investments either in seed or a round, or do you work directly with the founders who are raising money?

So, so oftentimes we, we will talk to founders. We will oftentimes try to help them raise equity capital. Mm-hmm. Um, a hundred percent of the time for what we do, um, we need a venture investor. And oftentimes there are two or three venture investors around the table. Mm-hmm. Um, most of the time they're folks that we have done business with in the past.

 there are groups out there who will do bootstrap company companies, but I think that is all of the tech banks in 2025 have gravitated towards needing a sponsor. Okay. So would you consider yourself more as a capital allocator or more as a strategic partner [00:10:00] to the companies that you work with?

Yeah, I think of ourselves more as a strategic, uh, partner. Not an allocator in the sense, because in theory we're trying to do, I. We don't have a finite amount of capital, like a, like a venture fund has, right? A venture fund raises a hundred million dollars. That's what they have to invest, right? Mm-hmm.

And obviously there are vehicles that they can bring in off the side, but a bank, if it, you know, I'm sure there are, are constraints within the organization as far as how much of a concentration you might want. Mm-hmm. But at the end of the day, we're just trying to work with good, good investors and good companies, uh, to grow our book of business.

Mm-hmm. How much due diligence does the, your bank or groups that you worked with before perform on a company? And, and typically, what's the timeframe? So if, for example, if I were a company and I was trying to raise $10 million and I wanted to secure a two or $3 million line of credit mm-hmm. In addition to the raise.

Uh, what, um, what, what typical timeframe does that look for you and what kind of information do you [00:11:00] typically look for? Yeah, it's not quite as robust as, as what the venture capitalists will ask for. Mm-hmm. Um, and since most of that work has already been done, we try to piggyback off of that. Mm-hmm. So, um, kind of soup to nuts from being introduced to a client or prospective client to formalizing and, and getting a loan in place is probably about a 60 day process.

Mm-hmm. Um, we do, we personally, for us at customers, we like to do most of our due diligence upfront. And I guess what I mean by that is we want to talk to the investors upfront because when we issue a term sheet, uh, that's something that we're going to live up to, you know, barring some unforeseen mm-hmm.

Kind of oddball circumstance or something happening in the marketplace. So some investors, you know, I. Don't like to talk to lenders until such time of like, okay, we've selected you now we'll talk to you. Now we, we like to do it in the reverse of that, which I think makes a lot of sense because in that, that way there are no surprises.

We learn what the investors are looking for and so [00:12:00] oftentimes we will glean, I. Um, maybe some perspective deal points that are important to the investor that we hadn't heard from the company. Mm-hmm. So we do all of that upfront. Um, so once we issue a term sheet, it's really a fairly quick process from there to get it approved.

Okay. Do you typically wait until a, a company has a lead in raising the, the round before you engage with them, or, you know, that's a great question. We, we need the round to come together. Right. So can we do a subject to term sheet? Yes. Do we like to? No. Um, we do like to see a lead. Uh, so our, our capital coming into a business is always gonna be contingent on the round closing.

Mm-hmm. So oftentimes we will work simultaneously with, um, with our borrowers or our new clients, but it's that that equity round needs to come together first. Okay. What type of companies do you normally work for? Are there specific sectors? 'cause I mean, obviously in our area, you can see there's a lot of, mom and pop companies.

Mm-hmm. [00:13:00] supporting the hospitality and Right. And other industries. Yeah. , I mean, we follow the venture capitalists, right? Mm-hmm. And these days it's AI first, AI second, AI third, I guess from, yeah. I mean, we've done a lot historically in B2B SaaS software. Um, the things we really look for, first and foremost, they're not revolutionary ideas, but we like, you know, companies that are gonna have solid growth.

Mm-hmm. and good gross margins and a solid management team. Right. And that's, that's separate obviously from the investor base, which they look obviously for the same things. We have historically not done a lot in consumer either consumer products or B2C.

So probably 90% of our portfolio falls in that B2B category of, of some, we, we will do some tech enabled services. Mm-hmm. But at the end of the day it's, it's really kind of B2B software is where, where we do most of our work. If we have a concentration within the portfolio, it's probably within FinTech, 

given that we're a bank, we've got some great expertise. The bank is always on the lookout for, you know, the [00:14:00] next, piece of software that we can mm-hmm. That we can purchase to, make our client experience that much better. Right. Now is your coverage nationwide? Are there certain like geographic regions that you work with?

Yeah, so, um, I'm responsible for the East Coast and that kind of blends into the Midwest. So we have three distinct regions, the West, Midwest, and, um, the East coast. Okay. And we, we have people pretty much all over the country, Texas. We have an office in Chicago. Um, mayor Huntington, who's one of the leaders of the group is here in Durham.

Ken Fugate is out in the Denver area. So we've got folks pretty much everywhere. Okay. And you said most of your, Colleagues work in New York. Most all of our executives, executives are, are, are in New York. Right. New York City. We've really expanded. I mean the, the bank has, really grown over the years.

Mm-hmm. And, uh, Sam sdu, our CEO, um, has bought into tech lending now twice having purchased the assets, of Signature Bank, which got customers into this sector. Right. Um, but prior to that, he hired a group that I used to work with in [00:15:00] Boston to start a late stage practice. So, you know, it's somewhat unusual for a bank, CEO to, you know, buy into, um, technology lending.

Not once but twice. Mm-hmm. Um, so this is a key pillar of what the bank wants to do going forward. Right. are there certain markets that are better than others? Like, do you like Boston, dc, New York you know, I mean, you can't ignore what is happening in New York City. Mm-hmm. I was there in January, and I was really struck by the fact that, um.

It's really become the number two to the valley, right? Mm-hmm. I mean there, there's no, it used to be Boston, New York used to kinda go back and forth, and when I was in New York, it was, it was I think a high of 13 for several days when it snowed here. Right? And we would go to meetings, and in between meetings, we'd walk into a coffee shop.

And I would tell you every single coffee shop that I went into in New York, the topic was tech. Whether it was finding a new board member, product market fit, raising the next round, who to talk to in venture. I mean, I was blown away by what's happening in Manhattan. Mm-hmm. [00:16:00] Obviously I spent 10 years in Boston, so that's a big market for us.

And then from there, we spent time in Atlanta. Um, there's a lot going on in Nashville, which I think is very interesting and that is interesting. And, um, and then Florida, you know, Florida's a little like southern California from a geographic perspective. You've got, you know, the distance between Tampa and Miami makes it difficult, difficult to cover in, in a day.

So, um, but we spend, I spend most of my time. New York, Boston, Atlanta, Nashville. That's where I spend most of it. You said New York, Boston and Nashville. Yeah. Okay. And Atlanta. And Atlanta, yeah. So not really much going on in North Carolina at the moment. You know, it's, um, it's interesting. There, there are a lot of things going on in North Carolina.

Uh, we are a small group. We're about 35 people. And so because of that, we tend to be reactive to what we see. So if we're in New York meeting with a dozen investors like we were last week, we tend to see things out of New York City. Mm-hmm. I think that what North Carolina could [00:17:00] benefit from, I'm talking Raleigh as well as as here, is just more venture money, right?

Mm-hmm. And how do you get more venture money? You get more success stories. We need more in Wilmington. We need more encino's. Mm-hmm. Um, we need more, uh, what's the serial entrepreneur in, in Raleigh, Scott Wingo. Mm-hmm. Mm-hmm. We need more success stories, more people like him to kind of, you know, create a more robust environment.

Mm-hmm. More Jim Roberts. More Jim Roberts. Yes. I think there can only be one. Jim Roberts, though. You've met Jim, right? I have met Jim. I met Tim. I was, uh, I was looking at LinkedIn one Sunday morning and came across Jim Roberts and what he was trying to do in Wilmington.

I immediately reached out. Jim immediately responded. Oh, yeah. So on a Sunday morning. Yeah. Uh, we got together for coffee up in, up in the Raleigh area. And look, I support anybody who's trying to make this region better. Right. I'm a hundred percent supportive of, and I think this is a great place to be.

Would love to help finance some, you know, some really solid startup companies [00:18:00] coming outta here. Right. Um, we just need more of them. Have you spent any time in the DC area? Have you met anybody here? You know, our, the person who leads our practice for the East Coast as far as lending goes. Mm-hmm. Kevin Johnson, lives in DC So, I spent, I, I love DC area.

I spent some time there. I lived in Northern Virginia in DC for a couple years when I was younger, but we kind of have that area covered. Okay. That's why I don't kind of mention that. So it's, it's easier for Kevin to cover. Where did you live in Northern Virginia? I lived in Arlington. Okay. Wherever the train over, and then I lived in, in DC I lived over by the zoo, so it was, uh, that was my early twenties.

Okay. Yeah. I live out near Dulles Airport. Yeah. So Loudoun County. Yeah. There's a lot going on up there. You know, I'm, I'm a limited partner in several funds in the area. Mm-hmm. And, I'm also, engaging with Blue Venture Investors. That's where I started doing. More, angel and Venture investing with those guys.

Yeah. Do you know a guy by the name of Jim Hunt, by chance? Name does not sound familiar. Yeah. He's kind of like a Jim Roberts person, but he's kind of like a rainmaker where he'll, he's [00:19:00] very smart, very connected. He started a company called Lav Rock. Ventures. Right. And they're raising their third fund now.

I'm in fund one and two, okay. Yeah. I think we are as a, as a group, we familiar with Lav Rock. Mm-hmm. Um, and I think Kevin handles that relationship out of DC So you've witnessed a lot in your career.

Going back to the, as you mentioned, the, the.com bust to the Silicon Valley Bank collapse. how has the industry changed over time and do you think we're in a better position today than we were in the past? Yeah. Such a great question, and we could talk about this for, for hours, but, um, what's happening today is, is truly remarkable.

And if I look back, you know, 25 years when I first got into to venture lending, venture banking, I. You know, pre-sale, phone, pre, you know, laptops were, you know, a newer thing. Mm-hmm. This is the best time in [00:20:00] history, I believe, to start a company. Right. Because of all the tools, how inexpensive, relatively speaking it is to start a company.

Um, with AI coming online in a very robust way, um, companies are getting to revenue faster, but what we've all also seen is a commoditization of venture lending, venture banking. Um, I remember talking to some of my colleagues back in 2005, and this is not a, my prediction was, Hey, fast forward 20 years to where we are today.

Mm-hmm. And the, the market, the landscape is gonna be a lot different. I mean, SVB had probably 80% market share back in 2005. I know I've heard conflicting things. Maybe they have 40 or 50% today. Mm-hmm. Post 20, what happened in 23? What happened was that, you know, he had Square one started in, in 2005 and the DNA, the, the training of all the quote unquote tech bankers, uh, most of which stayed at SVB until what happened in 23.

Mm-hmm. But then there were people like myself who ventured out and said, look, I know how to do [00:21:00] this. Um, I think I can do it equally as well and give someone another option. That's why we started the practice at Bridge Bank to give folks options. There was times at, at Silicon Valley Bank, uh, when I worked for one of their later stage groups where we would send out term sheets and a client would come back to us and say, Scott, you know, why do you have a page of fees?

And I'd have to sheepishly say, well, you know, it's this and it's that. And the reality is we could I say we as I worked at, at SVB, and so we came along at Bridge Bank and, and gave SVB competition kind of on the, the mid to later stage side, and score one came along and gave them competition on the early stage side.

Mm-hmm. Now you fast forward to 2025. There are probably six or eight banks that come to mind that can do venture banking, do venture lending, and do it well. Mm-hmm. Now, are there going to be eight banks going forward? You know, is the landscape going to change again in five years?

, 10 years? Absolutely. And who, who is gonna be here in five or 10 years?

That's where Mike Crystal [00:22:00] ball gets a little bit hazy. Mm-hmm. Does the increase in competition in your industry also increase the risk of, of managing these assets and providing capital and to the, to these companies? In theory, yes. Right. Because competition we liked, we talked about in 2024 as a group that, for lending, it was as competitive as it was for venture investors in 2021.

Right. Remember when everyone was putting money to work in 2021 and insanely high valuations, well in 2024, you know, post the, the meltdown or whatever you want to call SVB in First Republic in signature. Mm-hmm. You know, you have all these new groups and competition is extraordinarily fierce. Now, I've seen spreadsheets that CFOs will show us.

It says, okay, here are the five banks we're talking to. Here are all the terms, and I defy you to say which bank is which. Um, they're all within a fairly narrow band, you know, companies, early stage companies, [00:23:00] and I'm talking companies with minimal revenue. Mm-hmm. Sometimes no revenue deals are getting done at Prime, prime plus a quarter.

Mm-hmm. You know, you get, you get up to Prime plus one and you, you know, your own credit folks will say, well, you know, what's wrong with this opportunity? Why are we, you know, why are we getting this robust pricing? Our hope is that things return to somewhat normal, because I think the pricing. And we do take warrant coverage in the deals that we do.

 a lot of times, yeah, you'd almost have to just as some type of backstop you do. And, and if that, if the warrant coverage side of things goes away, if like, if we have a new entrant into the marketplace and their mantra is, you know, no warrants forever kind of thing. Mm-hmm. Um, that would severely disrupt the market and I think some folks would get out because you, you are going to take some, some loan losses along the way working with early stage companies.

We understand that. Mm-hmm. Um, that's that kinda the nature of what we do. So you need the, the warrants to some, somewhat offset those losses along the way and hopefully provide some upside to, to the, to the bank. Mm-hmm. Now, in your group [00:24:00] that does the tech lending mm-hmm. Um. Is it a subset of a larger portfolio that's mostly made of like residential mortgages or commercial banking that can kind of offset some of that risk?

Is that how? Yeah, I mean, we are within the bank. I mean, we're almost a bank within a bank, right. And I, the reason I say that is we've got relationship management, we have marketing, uh, we have client service. And, and most importantly, and this, I can't say this point strongly enough, is we have our own credit team.

Mm-hmm. And so, and I why that's important is, is these deals are different. Right. And I've worked in institutions in the past where, you know, the real estate, or the, excuse me, the, the credit folks are used to working with real estate, it real estate, real estate, real estate. And then the next deal they see is a money losing software company with no assets.

Mm-hmm. Or at least no balance sheet assets. And so that's a tough sell internally when you don't have your own credit team. Mm-hmm. So. We think, you know, there's no shortage of competition out there, and that will always [00:25:00] be the case, but we're trying to maintain our discipline. Mm-hmm. almost an investor or as an investor approach, we will, we turn down probably 60% of the things that come across our desk, maybe a little bit more.

Mm-hmm. so we are selective in what we do. Why is that such a high hurdle? Why is 60%, uh, why do we turn down that many? Mm-hmm. Um, part of it is, I mean, we're trying to, for us, relative to our competition, for us, it's not a market share game. Mm-hmm. Some of our competitors, it's very much a market share game.

 or it's how individuals are compensated. Right. We are, we're really compensated to do good quality deals, grow the portfolio in a, in a very, I wouldn't say conservative manner, but it, like I say, aggressively conservative. That makes any sense. Mm-hmm. And. Uh, so we, we were selective in what we do. Part of it is sometimes an investor will, we really like B2B SaaS with good gross margins, and then an investor will bring us an opportunity [00:26:00] with a kinda a low, low margin tech enabled service business.

Mm. And we kind of shy away from that. It, it's not a hard and fast No. But we will shy away from things that, that maybe we've had bad experiences or maybe there's an investor on the cap table that we're just not comfortable working with. We've had an experience with, and it's not usually, we don't usually paint firms, um, with that type of brush, but we do.

There are times where we would say, well, we've worked with this partner before, we would never do it again. So having worked in Silicon Valley mm-hmm. Boston, New York, and Toronto, um, what are, what are some of the biggest. Cultural and structural differences in the ecosystem, in the startup community that you worked with in those areas?

Yeah. It's when I really got to Boston that I, and people started asking me the question that, that exact question, how are things different between Boston and Silicon Valley? And it took me a little while to really kind of digest what people were asking. And it is true. I mean, when I look back on it in the Valley, people are definitely swinging for a [00:27:00] home run, right?

Mm-hmm. In almost every deal. Now, does that happen? No. Boston is very much measured, right? Sort of that east coast work ethic. We'll give you, we'll give you some money, now you prove it out, we'll give you some more money. Whereas the Valley here's a hundred million dollars, you know, go prove out this three page PowerPoint.

Right? Yeah. And so over time, I think. You know, I think there's been a, and, and then I think New York is kind of in between, right? Mm-hmm. And so, 'cause New York has a lot of transplants, um, you know, as does the Valley. And they're all great places. They're just different. And Boston, I was told when I went to work, when I first moved there in 2013, somebody pulled me aside and said, Scott, you know, you could be here 20 years.

You're always gonna be the new guy. I'm like, and I was there 10, and I still always felt, and whenever I go back, I still feel like the new guy. Mm-hmm. Are there any lessons learned that could be applied to the Wilmington market, maybe even North Carolina, Raleigh as a whole? You know, I, I think just people putting in the time to make this [00:28:00] area successful.

I mean, success begets success in this business, right? Mm-hmm. You have the whole crew that came out of, Encino, was spun out of Live Oak Bank. Mm-hmm. you have people that made money there. Entrepreneurs have spun off from Encino and started new, new ventures. It just takes time. Um, and we were talking about this before, but I was thinking about Wilmington and, and where I, because I've worked on both coasts, what does Wilmington remind me of?

And it, and from a tech center perspective, and, and the thing that came to mind was, um, Santa Barbara, which is a distinct tech area within Southern California, that Santa Barbara, la, orange County, San Diego, and maybe some stuff in the Inland Empire, but mm-hmm. Uh, Santa Barbara specifically, because it has one main university, it, it has some tech, it has some venture dollars there.

But it's not a, a particularly robust market. Mm-hmm. But it's a great place to live. Mm-hmm. It's difficult to get to, just like Wilmington. It's fairly, you gotta wanna be here. Right. And, uh, but it's, you've got [00:29:00] some really smart people who have had success and the, we just need more of it. Right. The, the density is what makes the Valley and New York and Boston, and maybe to a little lesser extent, Atlanta density just, it just feeds on itself.

Mm-hmm. I mean, entrepreneurs start a business, you know, whether it's successful or not, that typically start another one. And we just need more of that here. Do you feel the academic institutions, obviously Stanford mm-hmm. Is a big contributor to the Valley, just as like Harvard and MIT up in Boston. Is that one of the primary reasons, access to talent and some of the ideas coming out of those institutions?

I, I think it is. I mean, I think I never really fully understood until I moved to Boston, really the power of the labs. Um, whether it's Tarver or MIT and what really gets spun out of there, I didn't really have a true appreciation of. Right. Yeah. So I think that's really important. I mean, you have remarkably smart people altogether trying to do, you know, solve some very interesting [00:30:00] problems.

Mm-hmm. Uh, so I think that contributes, in a major way to, to those areas. Mm-hmm. Yeah. Having worked at Purdue recently mm-hmm. I got my PhD from there and, they're starting to come up to speed on some of the startup ecosystem type things and, and almost every university I come across are now teaching entrepreneurship.

Mm-hmm. You know, and the kids are like starting, wanna start businesses outta college. Mm-hmm. You know, 20, 30 years ago that didn't happen. You know, you have to enter industry and. Earn your marks and Right. Learn a trade and then come up with a business plan idea or need mm-hmm. To fill. And now, as you mentioned before, with the technology and, you know, the, the fact that it's so easy to start up mm-hmm.

A new idea, a new company that these, these kids are coming outta college with, uh, all kinds of interesting ideas. For sure. Absolutely. I mean, if I were coming out of college today, or my advice to kids coming outta college today, including my own, is go to work for a startup where, [00:31:00] go to New York, go to the valley.

You don't want that kind of cost of living. Go to one of the other areas that are less expensive. Mm-hmm. Find out who the top six entrepreneurs are and offer to work for free for six months, 12 months. Right. Um, if you're, you know, if there's, if there's capital to, to kinda get you that, that spot, because in tech, not every company's gonna be successful, but you're gonna learn a ton and.

getting that experience when you're very early on and maybe, you know, being able to pocket some capital if you choose the right one. Mm-hmm. And if you go to the valley or you go to Boston, say, I'm gonna, um, hitch my wagon to um, what's the name? It comes to mind like a Steve Papa.

Mm-hmm. Steve, you know, if you don't know Steve's papa's name, he made, uh, he sold Endeca. Um, Endeca turned in that management team, um, went off and did something completely different. They started Toast. Mm-hmm. You know, a restaurant technology that we all see mm-hmm. Pretty much everywhere we go. Well, Steve took some of the money from Endeca and he was really the only [00:32:00] folks that would give and Toast money back in the day.

'cause no one would finance restaurant technology. Mm-hmm. And the company's been wildly successful. interesting. Mm-hmm. pivoting to the venture capitalists mm-hmm. How has that relationship changed over the last 10, 20 years between the banking industry and the VCs? I think it, it, as, as things have become more commoditized, I think it, the industry has just matured.

Mm-hmm. And I think it used to be the Wild West out in California. I think VCs, at least the ones that I talk to, and maybe it's more of a an east coast thing, are these days on average more, more interested in talking to people like myself, right? Mm-hmm. Because they know that maybe I have a network that I might be able to find their next best deal.

And we used to have meetings when I was in Silicon Valley. You'd set up a meeting with a known name vc. It got postponed two or three times, then you get in, the meeting was delayed. Then you get 10 minutes of someone's time. Before it was like, off you [00:33:00] go. Mm-hmm. Well, you're not gonna develop a relationship

that way. Mm-hmm. So for us it's really, you know, being in front of folks sending deal flow their way, but I think it just, it is just matured to, it's more of a symbiotic relationship these days. I think venture debt, um, is now truly runway extension, while it's not for everyone, it's utilization in the appropriate circumstances can really help a company get to where they wanna get to.

Absolutely. Yeah. Yeah. I recently read on LinkedIn that venture debt is at a all time high. Mm-hmm. Somewhere around $53 billion. Mm-hmm. What is your take on venture debt in the current position? So, yeah, I saw the same number when I was preparing for this and I, and I compare that to the venture dollars invested in 24.

Mm-hmm. And the percentage was about 25%. So, um, and that's kind of at historical norms. When I, someone asked me if I raised 10 million, what's a rule of thumb? How much I can get? Well. Give or take 25%, right. Or two and a half million. [00:34:00] Mm-hmm. So the current, the current environment being at all time high, right.

Is that, do you feel it's risky? well, I think those numbers are skewed a little bit in the sense of, um, I think the numbers where we play, which is in the, kind of the one to 30 million space, and really the sweet spot for us is probably two to 15 per client. Now we have much larger exposures than that, but that's an initial check size.

Mm-hmm. I think those numbers, are skewed a bit higher because of what's going on at the top end of the market. Mm-hmm. you know, whether it's a BlackRock or a gall, something like that, or writing, you know, two, $300 million checks. Right. That's not what we do. I mean, our average check size is probably.

Average initial check size is probably 5 million. Okay. Uh, initially, uh, we'll go down as low as one. Mm-hmm. But I think at the upper end of the market you have people writing massive checks to support the massive venture checks that are coming into these businesses. Yeah. There seems to be a lot of liquidity.

Yes. Still in the market, just having to put it to work, um, in the current capital [00:35:00] environment, you know, as we sit here today, do you, how are things in your opinion? I.

Including what happened this morning with, uh, the president trying to threaten, uh, uh, firing the Jerome Powell? Jerome Powell. Yeah. You know, things, it, it's uncertain. It's what we all talk about, right? Mm-hmm. And uncertainty leads to more uncertainty. Now, you know, there's arguments to be made that it doesn't necessarily affect early stage companies, but uncertainty affects everyone.

Mm-hmm. And whether that's the entrepreneur that wants to leave, um, a large institution and start his own, or, you know, start his own company. Mm-hmm. Um, I think there's no shortage of good ideas. There's no shortage of capital, there's no shortage of talent, but uncertainty is what kind of slows these things down.

Right? Uncertainty as far as venture investors, right? Mm-hmm. How deep do they go in ai? Um, there are lots of, you know, are we getting false positives with, with ai, with new AI companies getting [00:36:00] to revenue so quickly, what are those churn metrics going to look like? Mm-hmm. You know, a year or two from now.

So. Um, uncertain uncertainty is credit markets don't like that. Um, certainly we don't, but, uh, we're trying to maintain just kind of that right down the middle of the, the fairway approach to, to what, how we look at the market. Does it change your risk profile or how the reporting on some of the other companies that you have provided funding for?

Um, I don't know that it changes our risk profile. Again, we, we have been very, and again, I'm, I'm one of the newer folks within the group, but what I have seen from us, um, is we've been very consistent. Mm-hmm. And so we may have lost some opportunities in '24 that maybe we could have won if we were just incrementally more aggressive.

But our thought process was, the market's going to come back to us, and we've seen that in Q1. Mm-hmm. Our success rate has gone up dramatically in the first part of the year. Now [00:37:00] is that because we're seeing more deals from investors that are we deem friendly or is it because the market's finding out about us?

Mm-hmm. Or we're just being incrementally more aggressive? Probably all those things contribute a bit. Mm-hmm. but I think our approach is, our, our team is fond of saying over and over again, it's a marathon, not a sprint. when in 24 when you're not winning as many deals as you would like, you know, that makes it painful.

But, um, mm-hmm. Now we feel good about where we are today. Oh, that's great. So you've founded technology groups with your banks before, in your past. Mm-hmm. What, what does it take to build that inside of a bank? Because it, it's almost sounds like a startup with, within an existing bank. And I, I tell entrepreneurs that I like to consider myself an entrepreneur, but I like a, a consistent bank paycheck.

Right. Um, it's the best of both worlds, right? It, it, it sort of is and, and it sounds more romantic than it probably is. So, um, we, when we started the, the group that, that most people listening to this will, will, um, [00:38:00] understand is, is Bridge Bank, right? It's become a fairly major player in the, in the tech space.

That group was, was, was pushed by the board members, but there were two board members that were, that did a lot of business with Silicon Valley Bank. They were founding members of Bridge Bank. Mm-hmm. They pushed senior management of Bridge Bank early on, um, to get into tech. And it was over the objections of senior management, but they wanted to do it.

Why did they wanna do it? Be it one reason only? It's it's deposits. Right? And in the Valley, very target rich environment, you could see all the deposits that SVB held off their balance sheet. So that's how they got into it now. Mm-hmm. We were starting that group at the same time. Square One Bank was starting, which was back in 2005.

As I mentioned earlier. They raised a hundred million dollars to this day. As far as far as I know, it is the only pure play tech bank ever started. Right? Mm-hmm. Silicon Valley Bank. For whatever it is today. Uh, mostly, uh, exclusively a tech bank was a [00:39:00] commercial bank with a tech practice when it started.

Mm-hmm. So it started back in 1983. Roger Smith, the founding CEO of the bank, um, was friendly with a lot of VCs in the Bay Area. And he had this idea that I'm gonna take my VC friends' money, I'm gonna bring it into Silicon Valley Bank. He was at Wells Fargo at the time. And so once he brings that in, which he did, said, well, what am I gonna lend it out on?

Well, the short answer was, tech lending really didn't exist back then, so he lend it out on real estate. Mm-hmm. And which ultimately, um, if, if you look back at the history of SVB, it, it almost led to their demise in the early nineties, um mm-hmm. Where they were under an order and some people, executives were, were kind of.

Um, let go. And John Dean came in and created SVB that it is today, or at least up until 2023. Mm-hmm. So when we started the practice of Bridge Bank, I mean we were, I used to refer to it as the Ellis Island of Tech Lending. We, we, we didn't have a term loan product. We didn't have a venture lending product, but we wanted to be in this space and, and we thought, okay, you know, how do we do this?

And [00:40:00] so, you know, I was charged with, with the sales side of that, and I looked around and said, okay, I've got SVB in my backyard, literally in my backyard, got square one that just started up. I still have a Comerica that, that is pretty robust. Mm-hmm. And I came up with like, we should partner. And it was the only thing we could do, I think, at the time.

Mm-hmm. Because I, I wasn't going to change the credit profile of what the bank wanted. Mm-hmm. So I went out and I met every single venture lender who would talk to me. Mm-hmm. And I said, look, we'll do the revolver, you do the term debt and we'll take the deposits and. So we ended up doing that and that's how Bridge Bank got started.

Mm-hmm. We were just doing partnership deals. We were, we tried to place Switzerland amongst the different venture lenders. And that's kind of because you need to prove a track record before you can Right. Get into and, and maybe increase the risk profile. Mm-hmm. Um, and, and that's how we did it. It decidedly unsexy, and a lot of hard work and a lot of just kind of outworking SVB in their backyard.

Mm-hmm. and just finding that [00:41:00] incremental opportunity. And, you know, at the end of the day, you look back, it's now 20 years since that group was launched, it's probably the solid number two player in the space. Mm-hmm. I'm not sure who keeps records of market share these days. Right. But, I think they're pretty much a solid number two, which, I knew we would be successful.

Ultimately, I didn't know they'd be that successful. Right. So having worked at both large banks mm-hmm. And smaller banks, how did that shape your vision when you're trying to create this technology banking group? Yeah, it's, it really, I've always. Operated under when, whenever I've thought about switching opportunities and, and going to work for a new bank, I, I try to understand truly what the bank wants to do.

Mm-hmm. Knowing that I'm gonna be pushing the envelope of, of the bank's comfort level from a credit perspective. Mm-hmm. Because it's probably something they haven't done before. Right. And the credit group is probably, they haven't done it before. And so it's one of those things where if a credit person is, [00:42:00] you know, for example, you know, a bank that's 80% real estate.

Well, if a credit person takes a loss on a piece of real estate, well it's, you know, matter of course. But if they were to take a loss in something they don't know, IE software lending, you know, oftentimes someone can lose their job, so mm-hmm. It, so I, I've always tried to meld what the bank wanted to do with, with what I thought could be delivered in the marketplace.

Mm-hmm. And I think the smaller the bank, the better. I used to say that, but now I think, you know, banks up to about. It could be any size, but it's a matter of materiality and how big you want to grow the group. Mm-hmm. And I just think you have to have the right people is what really what it comes down to.

Whether it's a a, a larger bank, you know, I worked for B Bank of America way back in the day in sort of the.com era, pre.com, and mm-hmm. You know, when folks like, you know, pets.com and Webvan and, and others. Right. And it just, it was just too early. Mm-hmm. [00:43:00] Um, to do those types of things. And I think what you realize is you just have to have buy-in from, from everybody.

Mm-hmm. And, and even when you have buy-in from the CEO and the board and the regulators, it's still a difficult um mm-hmm. Journey because you're always doing something different. Right. so the practice I led in, in, in Boston, Cambridge Trust, it was always, we were always kind of that outlier. Mm-hmm.

 Now they, they love it in a sense that our, the deposit to loan ratio was, was robust. They love what we did, but we're just different. Right? Mm-hmm. We, we dress differently. You know, we don't, you know, at the time when I took the job at Cambridge Trust, the dress code was suit and tie, never took off the tie or the jacket.

Mm-hmm. And the last thing I negotiated with the CEO there was, I said, look, look, I, all the T's and C's are fine. I said, but I can't wear a tie. If I walk into a, you know, entrepreneur's office wearing a tie, they're gonna assume I work for B of A and they're gonna assume I don't know what I'm doing. Right.

 so I, I think [00:44:00] I took a, a played a small part in, in changing the culture over there, but it, at the end of the day, what I, you, you need a supportive senior management team. You need a supportive board. We have that here at customers. Mm-hmm. Been, it's, it's folks that have been doing this for a long time and the core team's been together for 20, 25 years.

But it's even under the best of circumstances from a regulatory standpoint, from an oversight. Mm-hmm. It's, um, it's never easy, you know? And, and even at Silicon Valley Bank back in the early days, uh, even though tech is pretty much all they did mm-hmm. It wasn't like everything was rubber stamped. Right.

It was always, you know, how you deal with, you know, different variables in these companies. Mm-hmm. So it's always challenging and always will be because it's different and, and the regulatory, whether it's the OCC or the FDIC are always waiting for the other shoe to drop, right? Mm-hmm. Like, why are your loan losses so low, you know, relative to, um, the risk that we perceive you taking.

Mm-hmm. [00:45:00] Always challenging. Always. Absolutely. So in your opinion, what are some of the more common successful elements o

f a successful agreement, working with a technology company when you're, when you're putting money to work. Mm-hmm. What, what are some of the, the, the items other founders should look for?

Yeah. As far as structure on a, on a particular transaction? Yes. Mm-hmm. So, for an entrepreneur considering venture debt, um, let's say they're, they're coming up on a series A. Mm-hmm. You know, I, I think, I think this is, is fairly true. Like I said earlier, it, it's a pretty tight band.

So let's say it's a typical terms or a four year, four year term, you know, with 18 to 24 months of interest only. Mm-hmm. Um, and then usually some sort of metric that if the company hits that the interest only period continues. Because what we see a lot of as entrepreneurs just don't want to pay principal.

Right. They're, they're building the business, they're building enterprise value. So is the longer [00:46:00] the IO period. The greater the runway extension for that. Mm-hmm. Um, particular deal. So, you know, deals are getting done at Prime. Um, they're either covenant free or covenant light. Mm-hmm. And what an entrepreneur should really look for is two things.

I mean, one of the Ts and Cs, right? But, but pricing should be in a pretty tight ban. But then there's this subjective things that I think are, are even more important than that are, is who do you have that comfort level with? Mm-hmm. Um, there's a vast difference between a JP Morgan and HSBC and some of the smaller banks, right?

Mm-hmm. If you are a, if you have aspirations to be an international company, great banks very well run bulletproof balance sheets. But at the end of the day, you wanna be able to pick up the phone. Um, and we wanna be able to pick up the phone as well and have conversations with our borrowers. 'cause we, we know that, you know, things, it, it's not up and to the right.

And so I. Is your banker willing to take risk? Have they historically taken risk? What, what are people saying about them in the marketplace? Mm-hmm. [00:47:00] Are they, are they quick to try to get out of a deal? Um, I have worked for institutions that their first line of defense, um, and they talk about it openly, internally, is, Hey, if cash gets anywhere near debt, just take it, take the cash and move on.

Well, that's not venture lending. Mm-hmm. And that's not being a supportive partner. And so I think the subjective things of asking all the questions around the term sheet mm-hmm. Of the term sheet's, one thing, it's black and white. Um, how are you, but how are you gonna work with me when, when there are challenges?

Mm-hmm. Um, that I think that is the biggest key and to how people should be entrepreneurs. Should be looking at who their venture debt provider is. Mm-hmm. Do you, in your deals, do you enforce collateral like accounts receivable or in, like, for example, in my, I did a deal a long time ago and I had to put my house, geez, that does go back a bit.

Yeah. It was only for a half a million dollars. It's 500 K is a lot of credit. Right. Uh, but I, you know, I had to [00:48:00] secure my house, you know, as a, as a backstop. But is that still part of the process? So I think those days are gone. Okay. I think if you were, I think, you know, banks not to pick on any local banks here, but if, I mean, everyone wants it to work with tech companies, right?

Mm-hmm. And all of their credit people say, well, I want secondary collateral. So back, you know, if you back, you know, 20 years ago if you didn't have, or even today, if you didn't have, um, a venture capitalist on your cap table, I. Then yes, you might have to pledge additional collateral, but mm-hmm. I, I've never asked for it.

I've never taken it. Okay. I think that, that sounds like something that, um, your local bank might ask for mm-hmm. As it's trying to kind of get into the space. Right. because all local bank presidents say, well, you know, capture some of the local deposits, right? Mm-hmm. But, but be safe about it. And so, um, we've never say never, I've never asked for any sort of additional collateral.

Now all of our lending is we're, we're a [00:49:00] senior lender. Mm-hmm. Which comes with a blanket lean on all assets Right. Of the company. But it ends, it ends there. Got it. Have you ever had an example where the company had to file for bankruptcy or kind of run outta runway? How do you handle those type of situations?

Yeah, I've been fortunate. I mean, the short answer is yes. knock on something. I've never lost money in the deals that I've been involved with. probably better lucky than good. but no, I mean, bankruptcies happen. Mm-hmm. Um, companies get sold for less than the debt is worth. Mm-hmm. and that's, we know that, as part of our group, it's, it's, we try to, part of, we try to manage to a certain loss level every year.

 for better or worse, this portfolio was purchased in middle part of 23. Mm-hmm. And so the bank has seen, you know, almost 19 months now of track record of ins and outs in, in 23 and 24, which were not great years. Mm-hmm. And, and so, you know, we, we probably [00:50:00] have, you know, I don't think we've had a bankruptcy in the last 12 months mm-hmm.

But we've certainly had companies that have less than desirable outcomes. Mm-hmm. And you just have to manage to that. And you, you try to manage down. So that as many investors can get paid back, and certainly we sit at the top of the capital stack, so we're first to be paid back. Mm-hmm. but sometimes, you know, it stuff happens and, uh, there's nothing there.

Right. In your industry, I know a while back, you know, CDOs, you know, collateral debt obligations was a big issue on one of the reasons why we had the financial crisis in, uh mm-hmm '07, '08. In tech banking, do they do something similar to that? Do you take your obligations and package 'em up and sell them and play the middle man?

We, we don't, I mean, we take a fairly granular approach to our portfolio. Yeah. So, and I don't believe there are any tech banks that do that mm-hmm. Today. Mm-hmm. so everything is done, all of our lending is done off our own balance sheet. Mm-hmm. Right. So we bring in deposits and, and lend those out, um, to our [00:51:00] clients.

So, um, best of my knowledge, we don't do any of that. Mm-hmm. I had no idea how big the debt. So sell resale market is. Mm-hmm. You know, I had a piece of property that I had purchased and sold mm-hmm. And I had some seller financing attached to it. Ended up selling the debt 'cause I wanted the cash to put it in something else.

Um, but that's a huge market. Like, there's, there's a whole mm-hmm. Underbelly of these institutions that do nothing but buy and sell debt. Right. It's very interesting. I just think it's probably the companies that we work with are probably a little bit too volatile for that. Right. And, you know, we also have, I mean, typically we're always, um, we have monthly reporting requirements as do all tech banks.

Right. So's a very labor intensive business. Things change month to month, quarter to quarter. Mm-hmm. Um, so it doesn't really lend itself to, to being able to sell that off and, and frankly we're in the business to, to build a balance sheet Right. Uh, of the bank. Right. Talk about some of the reporting requirements.

So when you, when you [00:52:00] become a financial partner mm-hmm. To a startup founder, uh, to our young company. Um, walk me through what are the requirements they have to do on a monthly basis? Yeah. Quarterly basis. Yeah. So month, I mean, it's pretty standard stuff. I mean, we wanna see monthly financials. Uh, we wanna see if companies at revenue, we wanna see AR and AP agings.

Mm-hmm. You know, every year we ask for the board approved forecast. Um, we do a lot with B2B SaaS companies, so we want to understand churn metrics, both on a gross and net basis. Mm-hmm. Um, oftentimes we'll ask for, you know, a quarterly board report, something like that. Mm-hmm. And these are all standard, uh, items between banks.

Mm-hmm. Um, but it, it is 95% of the time, it is all monthly reporting. So we are getting a snapshot, um, into our clients on a very regular basis. Mm-hmm. And, and because we're also, you know, the bank of record, we have insight into, you know, what the company's cash position is at any given time. Mm-hmm. So, so basically [00:53:00] you're, you're tracking these metrics on revenue capture expense.

Mm-hmm. Payables and cash flow. On a month to month basis, on a month to month basis. Mm-hmm. And specifically looking for, for early stage companies that are still in a cash burn situation. Mm-hmm. We're looking for remaining months liquidity. Right. How long before you have to raise another round or you go outta business mm-hmm.

Mean, and that's a big metric. you know, nine months. you know, if a company has less than six months of capital, there's obviously some things that go on maybe behind the scenes. Mm-hmm. and we're paying closer attention to those. but because we're having an ongoing dialogue with both the company as well as the investor, we have a pretty good insight as to, you know, where that additional capital is coming from.

Mm-hmm. And, you know, last couple years it's been, it's been tough. So it's been a, a challenge to manage through, some of these illiquid cycles that we've been through in the last, you know, two years. Right. I mean, I can imagine if you're in a very high inflationary period like we found ourselves in mm-hmm.

And now with tariffs and other things, it just causes. Dysregulation mm-hmm. Into the system. it's gonna have an impact on, [00:54:00] on a lot of companies. Mm-hmm. Especially technology and people are not making decisions, you know, like they were before. Right. So now your runway becomes more, uh, inspected as far as like protect the runway.

No, absolute your expenses. Yeah. And all of our lenders went through the exercise in the past week of rating their portfolio companies, um, from a tariff perspective, right? Mm-hmm. High, medium, and low. You know, because we do a lot in B2B SaaS. I mean, there are, you know, there are sort of factors that will impact those companies.

A global slowdown obviously would impact everyone. Um, but we don't have a lot of consumer product companies, so there are, I would say, you know, a handful of companies probably fall in that. Well, let's watch these carefully, right? And see what happens. Are most of your clients, US companies that will focus on us.

Consumer. Yeah, so. Market or, or do you see some international, we, um, we do business [00:55:00] specifically or solely in the us. Mm-hmm. We don't, we don't do Canada, we don't do Mexico. Um, we will work with companies, subsidiaries of European entities. Okay. So long as they have a, um, US subsidiary mm-hmm. Here. Um, but we don't do anything internationally.

I mean, we are, you know, it was a $500 million community bank that's now about a 200, or excuse me, $22 billion bank. Mm-hmm. Uh, focused exclusively on the us. Right. So what are some of the common mistakes that startup companies, founders will make, you know, after doing a deal with you that will cause you to probably reevaluate the, the agreement you have with them?

Uh, that's a really good question. I think companies that, um. The, the biggest mistakes that I see mm-hmm. Um, aren't necessarily mistakes, but when things just don't go as planned. Mm-hmm. And that happens a lot, right? Things just happen Oh. All the time, slowly. Mm-hmm. Or, or slower than, [00:56:00] than expected. And the entrepreneur feels like, I, I don't want to tell the bank, I, I don't wanna give them bad news.

They might do something draconian. Mm-hmm. Well, you know, the one thing bankers don't like are surprises. Right? Right. And so, you know, if, if we require monthly reporting and it's been 60 days, 75 days, 90 days, our assumption is that something is going wrong. Mm-hmm. Like, and we don't have those situations very often.

 but other than that, you know, we typically, you know, we're, we're supporting the entrepreneur. Mm-hmm. And so, you know, we've got companies that are a few that are rocketships. We've got some that are just kind of bumping along. but we're s support, you know, we try to support everyone the same way.

Mm-hmm. Um, but knowing that not everyone, not everyone's gonna have a successful outcome. Mm-hmm. What happens on your side when they don't meet the, the threshold of reporting requirements or their numbers start skewing in the negative way? Well, I mean, it goes back to the, the concept of [00:57:00] being a, a, a partner.

And there are times where, for example, we have several borrowers who, you know, have maybe spent all of their equity dollars, but have a $5 million venture debt line. Mm-hmm. and that's how they're, they're, they're borrowing it on that on a monthly or quarterly basis, and that's keeping them afloat until the next round.

And so, as long as reporting and as long as the communication, um, stays, um, is, is two way we will continue to support our portfolio companies. We've shown that time and time again. Mm-hmm. Now, there are times where. And we saw this a lot in '23 and '24, where a company would, would, especially companies that raised capital in 21 at high valuations mm-hmm.

Raised the capital, spent that raised venture debt, spent that, and then say, okay, well, and it's, it's a company that is growing maybe 15% a year. Like, okay, well decent growth as a middle market company, but not as a venture backed company. Mm-hmm. Um, and then they wanna reset [00:58:00] the clock on the interest only period.

So, and then the bank, whether it's us or anyone else, probably says, look, we, we need new capital to extend the IO period. Mm-hmm. Um, we want the investors to step up as well and prove that, that they want support the business. So companies in 23 and 24 were kind of stuck because they, they're, they're bumping along.

They might be, generally speaking, cashflow of break even. Mm-hmm. But they weren't gonna get a new bank lender. They weren't gonna get a new vc. So then what do you do? Right. So I think some of that has kind of worked its way through the system. Mm-hmm. We're not seeing as many of those requests, but at the end of the day, if we're in a deal with that, with the covenant light deal and, and our business model we're in and Right.

Um, and that, that doesn't mean, you know, that everyone's perfect, whether the entrepreneur or us, but we're in, we're, we're, we're in for the ride. Mm-hmm. So where's the next frontier for technology banking As far as like sector wise and or [00:59:00] technology? Yeah. I mean, we're here. I mean, I think AI is, here to stay and, and what that means.

And, and I. What it's going to touch and not touch, I mean, is open for debate. I remember sitting at a, at a tech conference back in probably 2006, and there was, I dunno if you remember Tony Perkins? He's Oh yeah. Mm-hmm. Um, red Herring always on mm-hmm. Kind of a, interesting person in, in the valley.

And he said, Scott, you know, back in 2007, he says, Scott, you know, to use a baseball analogy, we're kind of the top of the second inning in my opinion. Mm-hmm. And I thought about that and think, gosh, you know, we've been through so much the internet and the iPhone and, and the cloud and, and everything that it's gone on in my career.

And I, and I always keep that in the back of my mind, I think. Okay. If that was the top of the second, back in 2007. Mm-hmm. Are we in the top of the third now? Mm-hmm. I mean, it moves slowly. Mm-hmm. Um, and that's why I stay in this business. frankly, I can give or take the banking side, but I love working with entrepreneurs.

I love seeing what, what ideas are next. And this [01:00:00] wave that's happening now is, is, um. It's unbelievable to watch. Mm-hmm. I mean, the companies that are coming, I mean, the amount of capital that some of these companies are raising is astounding. So be interesting. Right. Do you think the rise of AI is also a threat to existing businesses as far as perhaps disrupting their business models?

Oh, a hundred percent. Yeah. And I think we all need to be very cognizant of, you know, is it going to take my job? I mean, I would, you know, starting out, if I was 25 today, I would love to start out with all the tools that I have, and I would become an AI expert as best I can. Mm-hmm. but I would also be concerned that ai, you know, from a, I forget the name of the, uh, CEO of Goldman Sachs came out a few weeks ago.

I. And said AI can do 95% of what my investment banker can do from an underwriting memo perspective. That is an astounding statement. Right. And [01:01:00] so that other 5% is human. So how many humans do you need? Right. I think as I sit here, you know, I, you know, I know AI at some point is I'm gonna turn my computer on, it's gonna gimme a list of 50 companies that based on what it pulled is, are companies that should, should be with us or mm-hmm.

Or are our key prospects as far, and, and you go back 20 years, you're sort of using a typewriter analogy, kind of hunting and pecking. Mm-hmm. Trying to find the right opportunity. And you have a lot of missteps now. It's, we're all just so much more efficient. Mm-hmm. Um, I just, I love what's happening now. I think it's, it's remarkable.

So you do go to a lot of tech conferences? I do. And you stay ahead of the curve. And technology is, I try and there's, and that's why I go, I mean, there's never any shortage of, of great ideas. Right. So some which you think, oh, you know, I should have thought of years ago. Right. You ever thought about starting your own company?

Uh, many, many times. And as I said earlier, I do it under a bank umbrella. Right, right. No, you're very [01:02:00] entrepreneurial, which is one of the reasons why I wanted you to come on the podcast. Thank you. Yeah. So that being said, nearly everyone of our guests always has a story of a mentor growing up. Mm-hmm.

Someone that influenced them to become the person they are. Who was that for you? Yeah, that's a good question. Um, you know, there's been a lot of people along the way. I mean, I, I thought about, I. Um, you know, who, who has really, who made the biggest mark? And I remember I went to work for GE Capital in the mid nineties.

Mm-hmm. And I didn't know, I, I had just graduated. I was an economics major. I was trying to find my way, you know, people said he should be in sales. Well, and I, I don't know what that means. I'm generally speaking kind of shy. Yeah. Um, and I, my first boss at GE Capital was a guy by the name of Peter Forests.

And Peter took the time to teach me finance in his spare time. And, you know, as an economics major, I, I don't know, like what's the difference between a balance sheet and an income statement. I had no idea. Right. Um, I knew how to go talk to people, but I didn't know any, I didn't know the nuts and bolts.

Mm-hmm. So he [01:03:00] gave me, um, I, I think fondly of him, I think he's retired over in Belgium now if, if LinkedIn is, is up to date. So, um, but along the way I always took the approach of. If I was the junior person, I would just listen. I, you know, 'cause at SVB we went out with two or three people, typically on a sales call, and I would listen to the senior person.

Mm-hmm. Now I've become that senior person mm-hmm. Most of the time. Um, and do most of the talking. Um, but I've met so many great people along the way. But I mean, Peter comes to mind, um, uh, early in my career. Mm-hmm. So I'm grateful for that. Do you mentor other young bankers and college students? Um, yeah, if asked, sure.

Um, it's, I always feel like, and we just sent, um, I dunno if it's a mentoring role, but I, there's a, one of our, um, one of my colleagues is about five, six years outta school, and he was working in Durham. And we've wanted to open an office in, um, New York City for some time, given all the activity that was there.

So, um, [01:04:00] he agreed to move to New York City. Mm-hmm. And I'm not say it's kind of collectively, you know, he's in his late twenties. I mean, what a great opportunity to be in New York City with AI and everything, FinTech and everything that's going on. Mm-hmm. But also having the support of people like myself, people like Kevin Johnson, who is in our DC office along with the rest of the team.

It's a phenomenal experience. And so I always, you know, if someone reaches out on LinkedIn and as an entrepreneur, uh, or sometimes I get people that I went to school at UC, Irvine, I'll get people that reach out and I will, I will always say yes. Um, even if I know that I can't be helpful. Mm-hmm. I will always say yes.

'cause maybe there's some sort of tidbit that I can share that might be helpful, 

What are, what are some of the top lessons learned or, uh, advice you would give to someone coming in either as a founder looking for capital or trying to enter the tech banking sector? That, that everyone you talk to, and I mean everyone mm-hmm.

Could be your [01:05:00] next investor, could be your next client. Um, never close any doors, never burn any bridges. I mean, it, it, in this, especially in this tough funding climate mm-hmm. Um, I think you have to look under, um, as many rocks as possible. Yes. I mean, if you've had, if you've had two or three times successful entrepreneur, yes you're gonna be able to raise capital pretty easily.

Mm-hmm. But if you're a first time entrepreneur that, um, is looking for revenue traction in your company, looking for capital. I think you have to turn over as many rocks as possible. And that means talking to people like you, talking to people like me. Um, leaning on your attorney, leaning on your CPA, like, you know, help me get to, you know, if, if the objective is to sell your company for, you know, a billion dollars, well how do you get there?

How much capital do you need? Right. Which means you gotta turn over a lot of rocks to get there. Right, exactly. So what are your plans now that you've moved to the Wilmington area? well summer's coming, so enjoy summer, enjoy, [01:06:00] uh, enjoy the beach, obviously. I'm trying to get more involved, in this area, you know?

Yes. Anytime there are events, I mean, Jim Roberts does a great job with, with events in the area. Mm-hmm. there are a few investors here, in town. I know. Canopy's got in a couple of folks here, um, Idea Fund out of, um, the Raleigh Durham area has Right folks. Mm-hmm. Um, so I'm just trying to immerse myself in this local ecosystem while at the same time trying to support New York, Boston.

 I spent a lot of time on airplanes. You travel a lot? Yeah, I do travel a lot, which I haven't done in a long time, but it's, it's been fun to, to see these different cities and to see, to see metros like Nashville. Mm-hmm. There's a lot happening there. Mm-hmm. Um, in a relatively dense area. You know, for example, Edison Partners, um, their core office, they move from New Jersey to Nashville.

Mm-hmm. And you know, so there's a lot going on and I'm just trying to play a, a small part and hopefully contribute to a few company's success along the way. Mm-hmm. I know you mentioned you worked with VCs. Mm-hmm. Um, but do you also work with family [01:07:00] offices as well? Uh, great question. So. A little bit.

Mm-hmm. And, and I, and I and I hedge only because we are not gonna make our investment decision on either a corporate VC or a family office, right? Mm-hmm. Because we view those kind of differently and we view those differently because there's less data out there on how they're going to behave. Okay. Um, so VCs, you know, we know what their MO is, we know how to react.

Um, I do spend a little bit of time in family offices. There's one out of of Florida that, that has an advisory practice. We see some deal flow from them. Mm-hmm. Um, and you know, obviously looking for pockets of capital, looking for deal flow, um mm-hmm. But family offices are a little harder to find as well.

Right. Yeah. They're under the radar. Right, for sure. Harder to network with as well. Right. Yeah. So how would a founder or up and coming company reach out to you? How would they find you? Yeah, in the world of information I'm not hard to find and, uh, it always drives me crazy with [01:08:00] entrepreneurs.

Um, will send me a LinkedIn, I, I dunno about you, but I detest LinkedIn. Mm-hmm. Their email format. Right. Um, my email, my phone number is on LinkedIn so you can find me. Okay, great. And I'm, uh, you know, send me a text, gimme a call. Um, I'm always happy to try to help or, or try to, maybe more importantly, maybe connect you to the next best person.

Right. Well, I know we are extremely lucky to have you Oh, thank you. In the Wilmington area. And I know Jim and others are gonna lean on you pretty heavily to help, help this, this market grow. Right. So, yeah. Well, thank you so much for coming. Thank you very much. Appreciate it. Absolutely. Thank you. Awesome Amplified.

CEO is produced by Topsail Insider, edited by Jim Mendes-Pouget, and sponsored by Cape Fear Ventures. For more information about Amplified CEO, Richard Stroupe or Cape Fear Ventures, please contact Christa at 910-800-0111 or christa@topsailinsider.com.