For the Triangle startup community, First Citizens Bank’s potential bid for Silicon Valley Bank is a dazzling possibility, one that could boost the region’s growing reputation for entrepreneurship — but would Silicon Valley elites and others in the startup ecosystem buy into a conservative-leaning, closely-held institution many have never heard of?
One of the reasons investors and entrepreneurs stuck with SVB was its startup-first culture — a culture that's not the norm at Raleigh's First Citizens Bank (NASDAQ: FCNCA).
Startup accelerator gener8tor of Wisconsin considered SVB a “landing pad” in Silicon Valley, co-founder Joe Kirgues said.
“They understood the best practices that venture firms and startups needed,” he told Triangle Business Journal.
Kirgues described a bank that “worked with us,” everything from helping to manage major cash deals to facilitating the large number of wires and investments that an accelerator makes each year. And gener8tor would bring corporate partners to SVB's offices in order to bolster connections in Silicon Valley.
The collapse of SVB "shook us to our core," said Neville Boston, founder and chief strategy officer of another one of SVB's customers — Bay Area-based Reviver, which has a connected vehicle platform, including digital license plates.
Like Kirgues, Boston said that to win back business, a buyer would have to embrace the entrepreneurship community and its ideas.
“What made Silicon Valley Bank so special was its relationship with the venture community and its ability to invest alongside founders of companies and to have good relationships with the VCs,” he said.
First Citizens would have to prove not only that it has a sound balance sheet but also that it could connect culturally with the innovators SVB was built around.
The bank has not responded to requests to comment on a potential bid for SVB.
In Raleigh, reaction has been more enthusiastic to the possibility.
Alex Lasssiter, CEO of Raleigh's GreenPlaces, an SVB customer, said it would be "awesome" for the Triangle.
"If it was under new management, if it was local ... we would definitely be looking at them," he said. "I'm imagining a lot of people in San Francisco suddenly realizing what Raleigh is."
The addition of SVB could mean a new business line for First Citizens, which has $109 billion in assets. But a lot is up in the air, as what’s left of SVB — which was a $212 billion-asset bank at the end of 2022 — isn’t known.
A stretch?
Brady Gailey, managing director of equity research at Keefe, Bruyette & Woods, said a First Citizens-SVB combination is not as much of a stretch as it might appear to longtime industry watchers.
Yes, First Citizens’ customer base looks different, "but at the same time, I think First Citizens can get up to speed and figure out how to best handle what’s left of Silicon Valley,” Gailey said.
First Citizens has a history of closing on distressed banks, including through more than 20 FDIC assisted deals. Its most recent and largest acquisition — CIT Group — could also go in that bucket, he said. That’s because First Citizens bought CIT at 40% of its tangible book value.
“I think they’ve shown their ability to get their arms around problematic loan portfolios and work them out,” he said.
What’s not clear is what First Citizens would be buying. While the FDIC considers its options — including splitting SVB into multiple parts via auction — First Citizens is reportedly exploring an outright buy.
“I’m sure there will be something left of Silicon Valley if First Citizens gets it and if they start working on it. I’m sure there will be some good pieces of business left, which I think they can get up to speed on,” he said. “And maybe it adds a new business line for them.”
What Triangle investors are saying
TBJ asked Triangle investors if a First Citizens buy might sway their portfolio firms to come back to Silicon Valley Bank.
Scot Wingo, founder of startup investor Tweener Fund and co-founder of Get Spiffy, a car-care startup that is a former SVB customer, said even with First Citizens as a buyer, he’d “advise startups to proceed very cautiously.”
But David Gardner, founder of startup investor Cofounders Capital in Cary, said that with government oversight, SVB “is probably one of the safest places to put money.”
Gardner said a First Citizens buyout could be good for the Triangle, particularly if it moved the SVB brand to here, which could “bolster our growing reputation as the Silicon Valley of the South.”
“I think our entrepreneurs would be comfortable banking with them moving forward especially as a local bank ,but the smart ones will always distribute their capital across multiple banks as best practice,” Gardner said.
Clay Thorp, general partner at life sciences investor Hatteras Venture Partners, said the venture community is looking for a bank that’s nimble and tuned to the needs of venture capitalists and their portfolio companies — needs that are “not usually provided by traditional banks.”
If First Citizens were to buy SVB and keep its operations and “plumbing” intact, he predicts a high likelihood that the SVB customer base will stay.
“If they try to absorb SVB into its traditional banking context, the venture community is likely to continue the exodus,” Thorp said.
