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Austin Ventures


									Venture Banking Presentation
       Comerica Bank
 Technology & Life Sciences
        July 12, 2002

   Venture Banking
     –   Product & Service Offerings
     –   Benefits to the Venture Investor
     –   Typical Financing Terms
     –   Intellectual Property

   Comerica Technology & Life Sciences
     – The Environs: Market Observations
     – Loan Structures
     – Portfolio Management

Venture Banking
Venture Banking

   • Provide traditional banking products
     and services to venture sponsored
     technology companies throughout
     their life cycle.
     –   Term loans & lines of credit
     –   Bridge loans
     –   Treasury and Investment management
     –   Equity Investments
     –   Trust, 401(k), etc.
     –   International Banking
Venture Investor Benefits

   • Relevance to the venture investor
      – The use of financial leverage enhances
        the equity return
      – Reduces the overall cost of capital
      – Debt is the appropriate vehicle for
        financing both short and long term assets
      – Trusted party to manage a portfolio
        company’s cash (i.e., the venture
Typical Financing Terms

      – Loan amounts can range from 20% – 30%
        of equity capital investment
      – Blanket lien on all assets
      – Fee (1% +/-), Rate (P + 3% +/-) &
        Warrants ( 1% of capitalization)
      – Covenants
        • The obvious goal is to protect the bank
        • The implicit achievement is communication &
          alignment of interests with investors
Risk Profile

   • We are aggressive with top-tier venture
     investors (institutional investors, dedicated
     funds, uncalled capital)
   • Until there is cash flow or financeable
     balance sheet assets, the primary source of
     repayment is the next equity round
   • The concern is almost always the timing
     and certainty of the next round of equity
      – As such, we must have an open and highly
        communicative relationship with the venture
Intellectual Property

   • The inherent value of the enterprise
   • Without a lien on IP, the bank is unsecured
     in AR (in a revenue licensing model)
      – Court precedent est. by Avalon and Peregrine
        Entertainment cases in which court ruled that
        lender was unsecured w/out filing on IP (at
        state and federal level)
      – Without a perfected security interest, it is
        equity risk
   • We are not practiced nor competent sellers
     of IP – all we hope to do is recover 100%
     of loan
            PART II
Comerica Technology & Life Sciences
Imperial/Comerica Merger

  • Completed January 29, 2001
  • Allows us to compete upstream with
    Chase, Fleet, et al
  • Balance Sheet: move from $7 bln. to $50
  • More comprehensive branch banking
  • Imperial management team continues to
    lead the Technology & Life Sciences
  • Bottom line: Larger financings, portfolio
    companies are better served AND
    investors continue to deal with the people
Imperial/Comerica Merger


     Total Assets   $6.5 Billion

     Charge-Offs       .87%

        ROE           21.37%

        ROA           1.55%
Imperial/Comerica Merger

                    Imperial        Comerica
                    9/30/2000       3/31/2002

     Total Assets   $6.5 Billion   $50.2 Billion

     Charge-Offs       .87%            .58%

        ROE           21.37%         17.84%

        ROA           1.55%           1.72%
Market Observations

   • The market for venture debt/banking is
   • PNC, Chase, Fleet out of the business
   • Dominated by Comerica and SVB
   • Comdisco bankrupt, Sand Hill Capital
   • TransAmerica, Heller Venture Finance and
     Western Tech marginal players
Market Observations (Cont’d.)

   • Comerica is a ‘relationship’ oriented
      – Comerica TLS risk tolerance is ~ $25MM+
   • A progressive, fast growing venture
     sponsored company can outgrow a smaller
     bank relationship ~ post SERIES B
   • Comerica represents a long-term banking
     partnership for technology companies
Recent Actions

   • VC Backed Software Firm
      – $23MM line of credit & equipment financing
   • Network Hardware Manufacturer
      – $7.5MM line of credit & term debt
   • Cable/Telecomm Company
      – $5.0MM revolving line of credit
   • Venture Backed- B2B Enterprise
      – $4.5MM line of credit
   • VC Backed Web Hosting Provider
      – $7.0MM equipment financing
Loan Structures

   • We continue to provide very competitive
   • We are very aggressive with companies
     backed by Top Tier VC firms- i.e. track
     record, adequate fund reserves,
   • We do want some semblance of structure &
     covenants at a reasonable price
   • There is no “no covenant” financing (read
     the fine print)
Portfolio Management

   • Without board representation, active
     communication with the venture investors
     is a must
   • Focus on SOLVENCY date, not out-of-
     cash date

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