Private equity units and investment banking groups at big commercial banks fight tooth-and-nail to court business from early-stage companies backed by venture capital but with few exceptions seem to almost actively avoid pitching traditional loan and deposit services to those same potential clients.
The would-be clients are often companies with nothing more than an idea, a certificate of incorporation, and a check from a venture capitalist. Profits are a distant hope. But those checks still have to be cashed somewhere. "In a country where banks are starved for deposit growth, this is an untapped gold mine," said Rosalind Looby, an analyst at Donaldson, Lufkin & Jenrette. A handful of local companies now command most of the deposit business. Silicon Valley Bancshares, a $5.4 billion-asset company in Santa Clara, Calif., takes about 50% of the national market. Others that have successfully tapped the segment include $3.6 billion-asset Greater Bay Bancorp in Palo Alto, Calif.; $7 billion-asset Imperial Bancorp and $8.7 billion-asset City National Bank, both in Los Angeles; and Comerica Bank-California, the $5 billion-asset affiliate of the Detroit-based banking company.