Silicon Valley Bank is putting down stakes in Canada’s thriving tech scene
U.S. lender waiting for final regulatory approval from Ottawa
Canada’s tech scene is heating up, and one of Silicon Valley’s oldest financial institutions wants a piece.
Silicon Valley Bank, the 35year-old lender focused on tech startups and venture capital firms, plans to hire more than a dozen bankers in Canada with the goal of eventually banking 40 per cent of the country’s tech and life science companies. It’s received authorization from Canada’s finance minister to open and is waiting on final regulatory approvals to begin lending.
Canada’s tech scene is thriving. Startups are proliferating, fuelled by increased local investment and the presence of big-name U.S. venture firms like Andreessen Horowitz and Sequoia Capital. Internet giants including Amazon and Google are hiring thousands of engineers in Vancouver and Toronto, and homegrown success stories like Shopify are taking off.
With all that activity comes opportunity for banks willing to lend to small, unproven startups, said Barbara Dirks, Silicon Valley Bank’s recent hired head of Canada.
Canadian banks have a longstanding and concrete view of risk that might make it difficult for them to dive into earlier-stage tech, said Dirks, a veteran of the Bank of Montreal and Royal Bank of Canada. Silicon Valley Bank brings a unique understanding of tech and the web of relationships in Silicon Valley and around the world to get startup investing right, she said.
One of those Canadian banks might beg to differ. Canadian Imperial Bank of Commerce has trumpeted its own interest in the
tech scene, buying tech-focused lender Wellington Financial and putting its CEO, Mark McQueen, in charge of a new “innovation banking” division.
While Silicon Valley Bank will initially only have permission to give loans, CIBC’s unit is already licensed to offer a full range of banking services in Canada.
Silicon Valley Bank won’t be starting from scratch. It already helps hundreds of Canadian companies with their U.S. banking, Dirks said. The goal now is to catch Canadian companies earlier and compete for deals directly.
The bank will be focused on loans from as small as $750,000, all the way to leading syndicates of hundreds of millions of dollars, said Mark Gallagher, senior market manager for the U.S. northeast and Canada.
Gallagher has led a team for years that’s helped Canadian tech companies bank in the U.S., but watching the activity of the last few years, he said he knew it was time to step up Silicon Valley Bank’s presence in Canada.
Venture capital investment hit about $3.8 billion in 2017, up from $3.2 billion the year before, says the Canadian Venture Capital & Private Equity Association.
Canadian companies that want to compete globally generally need to expand outside of their home market quickly. Shopify gets the vast majority of its revenue from outside of Canada. Linking companies up to partners and investors around the world is a major part of what gives Silicon Valley Bank a competitive edge, Dirks said.
It’s a stereotype in Canadian tech that the country’s entrepreneurs aren’t ambitious enough, and that they sell their companies to U.S. owners before pushing them as far as they can go.
Just last week, Prime Minister Justin Trudeau, who has marketed his government as a major supporter of the industry, said Canadians need more “swagger” when promoting domestic tech successes.
But Gallagher said they already have it. “The level of confidence in the entrepreneurs in Canada today is off the charts compared to what it would have been eight or 10 years ago.”