Bankrolling celebrities has given City National Bank its reputation. From serving Frank Sinatra and legendary sportscaster Vin Scully to working with Tony Award-winning shows like "Beautiful-the Carole King Musical," the Los Angeles-based firm is known as the bank of the biz.
Now the 60-year-old company is trying to recreate that magic in Silicon Valley, where tech entrepreneurs are assuming their own celebrity status. At a time when venture capitalists are investing in start-ups at a rate not seen since the dot-com bubble, City National is offering something that, for many companies, is even more irresistible: cheap debt.
Competition is fierce. Using an environment of record lowinterest rates from an extended period of government stimulus, City National is among a handful of banks aggressively trying to convert developers and their companies into clients. If it all pans out, maybe they'll have lasting banking relationships with the next Google, Facebook or Twitter and lots of money to manage from newly rich programmers.
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That's a big if. Technology is well into its fifth year of a major boom, and the combination of frothy valuations, high burn rates and a volatile stock market is leading industry pundits to recount unpleasant memories of past cycles.
Unlike equity, debt has to be repaid even when business turns south. The doomsday scenario worries venture capitalist Jon Sakoda of New Enterprise Associates, because debt "can handcuff boards and narrow the options available for start-ups that need to pivot," he said.
As things stand now, business is up and to the right. Banks like City National are looking to get a slice of a market that has long been the purview of Silicon Valley Bank, or SVB, in Santa Clara.The other aggressive players taking on SVB are Comerica, which has been active in spurts, and smaller niche firms Square 1 Bank and Bridge Bank. The race for clientele is pushing prices so low that early-stage Web companies with some momentum can borrow a few million bucks at a rate that's a little higher than what they'd pay on a home mortgage.
"Our competition sees us in the marketplace and the result has been very favorable terms on pricing for venture-backed companies," said Rod Werner, the managing director of City National's technology and venture capital banking group in Silicon Valley. "We've created a marketplace that's more competitive."