Banks Finally Focus on Hi-Tech
NationsBank and others are taking the hi-tech plunge after Silicon Valley Bank opens in the Netplex
Area banks have finally realized technology is where the money is.
The Netplex financial community and investment bankers are directing their focus to high-tech, a strategy that has long been discussed, but with little impact.
"Compared to conservative sectors like utility, technology is a free-for-all," said Ulric Weil director of the new technology group of Friedman Billings Ramsey. "Technology is the driving force behind economic growth and productivity."
In January, Russ Ramsey, founding partner of Friedman Billings Ramsey, decided to start a technology initiative at the investment and brokerage firm in Arlington, Va. The firm, whose core business is banking and real estate, recognized that branch banking is a dinosaur. The firm hired Ulric Weil, formerly with Ferris Baker Watts and the Gartner Group, to be a part of a technology group of analysts and corporate finance executives that would steer their financial services clients to companies in electronic commerce and banking markets.
"Banks recognized that they must join the 21st century," said Weil, who will serve as a technology analyst for the firm. "The marble floors won't fly anymore."
According to Weil, the technology group has already met success since its Jan. 2 launch. It recognizes Northern Virginia and Montgomery County as very fertile areas for Internet security companies. It has three people working in the technology group and expects to hire six more in the next three to four months. The firm also plans to add seven people to its corporate finance department to be included in the technology initiative. Currently, investments range between $40 million and $70 million.
And the trend is spreading.
Ferris Baker Watts, a full-service investment bank in Baltimore, also is redirecting its focus on high-tech companies in the Washington area.
According to Doug Schmidt, senior vice president, the bank realized that there were no other investment banks making a focused effort on the many sectors of the high-tech area. Schmidt plans to target information technology, telecommunications, software, biotech and Internet companies. The bank has added two people in the last six months, including a position in corporate finance to specifically target high-tech companies in the Netplex.
"The region is asking for more capital or more investment banking resources," said Schmidt. "We do most of the things that a Wall Street firm does on a regional scale."
According to Bill Hodges, president of the Capital Region, NationsBank has regrouped its commercial lending and government contracts groups to form The Washington Technology Group. It will target later stage high-tech investments.
According to Hodges, it became apparent that growth and opportunity was broader than government contracting.
The bank also has created an open-ended venture fund for Mid-Atlantic companies in need of later stage investments. Investments will range from $500,000 to $5 million.
"The science and technology industry will be the core of economic development for the Washington region," said Hodges. Silicon Valley Bank recently opened an office in Rockville, Md., focusing on emerging high-tech companies and life science-based companies. The bank serves as a lending institution for equipment financing for early stage companies. It also lends to companies already in a growth pattern. Last year, it led UUNET Technologies through a $66.15 million initial public offering.