Five months after regulators took over Signature Bank of New York, a pair of its well-known bankers in Durham are starting a new entity – one they say can help fill a gap for entrepreneurs still wary after Silicon Valley Bank and Signature both collapsed in March.
Dhruv Patel, until recently a senior vice president at Signature’s venture banking group, is launching a startup venture debt fund with longtime banker Zack Mansfield. Mansfield, until recently, was managing director of Signature’s venture banking group.
The longtime friends and colleagues – Patel and Mansfield were both among a group of Durham bankers who left Square 1 to help Signature kick off its venture business in 2019 – decided to launch the fund to fill a gap exacerbated by the industry “craziness,” notably the regulatory takeovers of SVB and Signature in March.
On LinkedIn this week Patel described the days that followed Signature’s takeover as a “whirlwind as we ensured all our clients were safe.”
First Citizens Bank (Nasdaq: FCNCA) of Raleigh and Customers Bancorp, based in Pennsylvania, bought the assets of SVB and Signature, respectively.
“When the dust started to settle we were forced to start thinking about what to do next, as a group we had spent the last four years building was gone,” Patel wrote.
Patel said his immigration status had long dictated many of his professional decisions – and when his green card came through in 2022, it had him “more inspired than ever to take advantage of the opportunity.”
And Patel saw big opportunity in the market, even before March – which heightened the entrepreneurial itch.
Economic uncertainty, dropping software valuations, dipping equity markets – it all added up to a “different era of startups,” Patel told Inno in an interview.
“The combination of this craziness… there’s going to be tons of consolidation, lending standards are going to tighten up… it all leaves incredible opportunities to partner with really great businesses,” he said. “There’s a demand-supply imbalance in the capital markets…. We believe there will be many winners on the bank end of things, but also believe it’s the private credit that will be able to move the quickest and be agile.”
The leap
So that’s what Patel and Mansfield decided to do, take the entrepreneurial leap and fill the gap with a new venture debt fund.
It’s early in their efforts.
Patel declined to comment on the specifics of the fund itself, though he said the plan is to reach out to investors – many of whom Patel and Mansfield already know from working in the innovation economy for the past several years.
The new fund – which doesn’t even have a name yet – will work with the “same types of entrepreneurs, the same types of companies we worked with our entire careers.” That means growth-stage tech companies. And it will partner with venture capital partners to help fund startups.
Patel announced the move on LinkedIn Thursday as questions kept coming in from former Signature clients.
“A lot of people have been asking, where are you guys,” Patel, whose last day with Signature was July 21, said. “We needed to put something out there to tell the community hey, we’re still very active.”
Mansfield, on his LinkedIn profile, describes it as “building a new venture debt fund to fund high quality technology companies backed by sponsors.”
Mansfield couldn’t immediately be reached to comment.
But even with few details, entrepreneurs and investors told Triangle Inno they are excited about the possibilities.
What investors are saying
“I think new sources of funding, be it equity or debt or some blend in the Triangle, are positive news for the region,” said Scot Wingo, the serial Triangle entrepreneur who founded the Triangle Tweener Fund.
Justin Wright-Eakes of Oval Park Capital, said that, while banks have historically provided more favorable lending terms than venture debt funds, “startups in the Southeast have always had a more difficult time accessing capital, whether equity or debt, than their West Coast counterparts.
"So I’m always happy to hear about new capital providers in the area, whether it’s a new VC fund or new venture debt fund,” he said.
Tobi Walter, a partner at Triangle investor Cofounders Capital, said his firm “often” works with venture debt funds, and that the new entity would be welcomed in the region.
“Everybody still sees this area as a deal rich, cash poor area,” he said. “So anything more that can happen in that area is great.”
Mitch Mumma, cofounder of Intersouth Partners in Durham, said Patel's and Mansfield's experience will also prove advantageous.
Prior to banking, Patel worked with entrepreneurial support organization Council for Entrepreneurial Development in Durham, making connections to several up-and-coming firms. And Mansfield has long banked with upstarts (including Walter's previous firm, startup Shoeboxed), having started at Square 1 back in 2007.
“They are both very experienced and good people, which should help them raise money,” Mumma said in an email. “That will be the hardest part, particularly in this environment. From my viewpoint, the more capital that is domiciled here in the Triangle, the better, even though their investment footprint is likely to be national in scope.”
Private debt funds are also unregulated, which gives them more flexibility in how they can approach companies, Mumma said.