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The value of niche banks
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June 3, 2000: 7:00 a.m. ET
Entrepreneurs are finding that specialized banks cater to their needs
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CITY (CNNfn) - Depending upon what industry you are in, you might want to consider finding a niche bank.
When Karl Karlsson, founder and CEO of Scoop Inc., is in Monte Carlo entertaining potential investors on his 70-foot yacht "Mirabelle," he faxes or e-mails his banker at Silicon Valley Bank in Santa Ana, California, if he needs to move money around.
 "They'll stay up till midnight to speak with me if they have to," said Karlsson, whose Santa Ana, California-based Internet company went public in 1997, raising about $7 million in an initial public offering. The company's 40 employees provide a variety of customized news and information products for clients.
Karlsson, 33, spends a lot of time on his yacht and in Europe expanding his company's operations. He switched to Silicon Valley Bank at the suggestion of his investment bankers.
One reason he likes the bank is that it lets him use shares of the company's stock as collateral for loans. "We can borrow money favorably against our stock, much more liberally than most commercial banks would allow... and the interest is low," said Karlsson.
The bank's executive banking group also handles "a reasonable amount" of his personal money, which simplifies things.
Silicon Valley Bank, founded in 1983, focuses its efforts on serving high-tech and biotech businesses. It also makes a fair amount of real estate and commercial loans and caters to religious organizations. "Through the niche approach, we bring value-added knowledge of the industries," said John Dean, president and chief executive officer. "We are known as the bank that lends to emerging growth companies."
The bank -- which has offices in Atlanta; Wellesley, Massachusetts; Austin; Boulder; Rockville, Maryland; and the Seattle area, as well as in California -- works closely with venture capital firms, both as clients and as a source of referrals.
A different view of banking
Once wooed to the bank, most entrepreneurs deal with Jean Blomberg, senior vice president and manager of the executive banking division. Her view of private banking is a bit different from that of most commercial banks.
"We don't require a minimum net worth, and we are anxious to work with entrepreneurs," said Blomberg. "Some of our products and services are more creative.
"For example, customers sometimes act impetuously and need cash fast. One client called from his jet to say he had just flown over a beautiful piece of  land in Montana and needed cash to buy it-that day. Another customer called from London requiring immediate funds to buy a new jet. A third client, who owns three homes, buys a new one every year. He keeps Blomberg and her associates busy because he likes to set up a homeowner's equity line for each home.
"The big-ticket item in the Silicon Valley is housing," she explained. "There are bidding wars with homes selling $100,000 over the asking price. It's unbelievable. Then the buyers often bulldoze the homes and start all over again.
"The first thing most male entrepreneurs do when their company goes public is buy a very fast, very expensive toy. "We have our fair share of yacht loans, Ferrari loans, and airplane loans," she said.
Because most of their busy clients are in their boats, planes, or cars, Silicon Valley bankers communicate via phone, e-mail, and fax. The bank is looking into other high-tech modes of keeping in touch with its busy customers.
(Excerpted from 201 Great Ideas for Your Small Business, Copyright 1998 by Jane Applegate. Published by arrangement with Bloomberg Press. Excerpts appear on Saturdays on CNNfn.com.) 
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