As head of technology banking at Wells Fargo, Tom Harper has a unique perspective on what has become an unstable and at times daunting fundraising market for startups.
The lifelong Philadelphian has been Technology Banking Division executive for Wells Fargo commercial banking for the last four years, working to provide financial services for, and invest in, tech companies and venture capital firms alike. Working with the division's roughly 1,500 clients nationwide gives Harper both bird's-eye and in-the-weeds views of the national funding landscape and the local startup ecosystem.
Harper, a La Salle University alum who got his MBA at Drexel University, was recently part of a team that launched the Technology Banking Advisory Group at Wells Fargo (NYSE: WFC) to provide financial guidance for early stage and mid-size tech companies in areas like software and financial and agricultural technology.
Harper spoke with the Business Journal about opportunities to grow Philadelphia's tech scene and keep tech talent in the region, and offered advice for entrepreneurs grappling with the difficult fundraising environment. Here's what he had to say:
Answers have been edited for length and clarity.
How has Philadelphia's tech and startup scene shifted over your four years in the role?
This market in particular has been trying to broaden the success that we've seen in the life sciences area to more traditional technology sectors like software and fintech. I think that's why you see the continuing investment by venture and private equity in entities that are operating in this market.
It's a concerted effort that's been put forth. For instance, I'm on the the Chamber of Commerce [for Greater Philadelphia] board and there's a tech talent initiative ... where we're specifically focused on attracting tech talent here. That's important because you can't found a company or fund a company if you don't have technologists to help develop its product and grow.
What has you optimistic about the Philadelphia startup ecosystem?
We've had some really nice successes in this region and we're having more of those successes. It's all a function of attracting that talent which attracts capital. So for us to be top five on the latest venture monitor report in terms of venture investment, that probably catches some people by surprise. A lot of that is life science focused, but part of what we're trying to accomplish is to broaden over to software, broaden over to fintech, keep going, broaden that investment. That will be a tremendous lift for this region.
What advice do you have for startup founders needing to fundraise in the current market?
Be very clear on the mission, the core offering, and be very tight on the pitch or the story. Then, most importantly in this environment, operate very efficiently. That focus on the core mission helps you operate more efficiently because you aren't as likely to wander into ventures that aren't core.
It's all about preserving liquidity. What we're hearing from our venture partners is you probably need 18 months to 24 months of liquidity from your last raise. Particularly if you're growing and investing, that's a challenge. So you have to be focused and pretty discerning in how you invest and how you grow. People want to see growth, but they want to see quality growth while preserving liquidity.
What segments of the tech industry are thriving despite the current market?
The biggies are still software, fintech in particular. But the shift has been towards, we were more or less focused on cyber and maybe blockchain in that context, but it has moved towards A.I. It's interesting, likely as a function of where valuations have been, we saw a lot of the venture investments shift from growth stage companies down to early stage companies. I think it enabled venture to fund earlier, perhaps less expensively and with more granularity.
What can we expect from the venture market in the next six to 12 months?
Venture will rebound. It's well-funded. So it's a question of how and how quickly does that capital get deployed? Some of that is, you have a bit of a mismatch between valuation. The founder may value his business or her business this way, and the private investor community might value it at 25% or 30% off of that number.
It used to be anathema to have a down round, if you will, where you raise a valuation that's lower than the last valuation. But I'm seeing that the ability to raise is more important than what might be perceived as a down round.
I'm very optimistic, mostly because venture has capital and the last thing they want to do is return it. They want to deploy it prudently.
