Financing Options

1

• Financing Options
• For Your
• High Tech Startup
• J. Doug Mangum
• Southwest Division Manager

2
Venture Bank
Not a VC
Not a Commercial Bank
3
CORPORATE HIGHLIGHTS

• Founded in 1983 to serve emerging growth
  technology and life sciences companies
• 4.0 billion commercial bank
• Ranked Top Performing Bank in 2000 by U.S. Banker
• Publicly traded stock (Nasdaq SIVB)
• More than 9,500 clients -- from Idea to Beyond
• Nearly one-third of all 2000 technology and life
  sciences IPOs were SVB clients
• Specific industry specific lending groups
• Banked more than 30,000 startups over 18 years
• Silicon Valley Bancshares has investments in more
  than 200 domestic and international venture
  capital funds
• More than half of all VCs in the United States
  are Bank clients
• 27 offices nationwide
• Fortunes 100 Fastest Growing Companies 2001
  (ranked by three-year annual growth rate)

4
(No Transcript)
5
CORPORATE LANDSCAPE
FULL SERVICE
- ONLINE BANKING- ONLINE BUSINESS SERVICES-
PRIVATE BANKING - REAL ESTATE - SPECIALTY
FINANCE
TARGET MARKETS
PRODUCTS SERVICES
- CASH MANAGEMENT - COMMERICAL FINANCE -
CORPORATE FINANCE - DEPOSITORY SERVICES -
EQUIPMENT LEASING - INTERNATIONAL SERVICES -
INVESTMENT PRODUCTS SERVICES
- INDUSTRY SPECIFIC FINANCE - LIFE SCIENCES -
TECHNOLOGY
INDUSTRY SECTORS
GEOGRAPHY
- ASIA- AUSTRALIA- EUROPE- INDIA- MIDDLE
EAST- UNITED STATES
- BIOTECHNOLOGY - COMMUNICATIONS AND
ELECTRONICS - EMERGING TECHNOLOGIES - MEDIA-
MEDICAL DEVICES
- PREMIUM WINERIES- PROFESSIONAL SERVICES- REAL
ESTATE- RELIGIOUS LENDING- SOFTWARE AND
SERVICES - VENTURE CAPITAL
BREADTH OFCOVERAGE
6

7
SVBs HISTORY OF FINANCING TECHNOLOGY LEADERS
8
Why Debt?
Debt Limits the Dilution of the Entrepreneur
9
What Type of Debt is
available for
a start up company?
10
Debt Financing Vehicles
Stage of Development/ Financial Profile
RD
Product Launch
Market Penetration
Maturity
Cash Flow Negative
Cash Flow Positive
Available Debt Financing
Niche Banking
Factoring
Asset Based
Traditional Banking
11
Niche Banking

• Finance equipment, software, leasehold
  improvements and working capital growth

• Moderate flexibility - financial performance
  monitored with or without covenants - blanket
  security interest

• Moderate cost - 7 to 12 all-in yield -
  warrants generally required

12
Venture Lease Financing

• Used to finance equipment purchases, including
  some tenant improvements - 36 to 48 month term

• Highly flexible - no financials covenants or
  other types of financial controls

• Higher cost - yields average between 9 to 18 -
  warrant coverage of 5 to 10 also required

• Requires established access to equity, favorable
  financial conditions, strong management and
  satisfactory collateral

13
Factoring

• Used to finance accounts receivable, typically
  utilized when other financing vehicles are not
  available

• Highly Flexible - no financial covenants and no
  requirements for equity financing

• High Cost - all-in yields between 18 and 30 -
  generally warrants are not required

• Requires ONLY strong collectable receivables

14
Asset Based Lending

• Used to finance accounts receivable and
  inventory, revolving lines of credit with
  extensive reporting and cash control procedures

• Flexible - provides high borrowing availability
  with minimal financial covenants

• Reasonable cost - all-in yields of 11 to 16

• Requires favorable operating trends and strong
  collateral base, but does not require access to
  capital or substantial balance sheet strength

15
Traditional Banking

• Use to finance accounts receivable and equipment.

• Limited Flexibility - requires strong financial
  condition and cash flow - includes financial
  covenants

• Low Cost - all-in yields of 6 to 8

• Requires strong historical operating history -
  generally adverse to technology companies due to
  their high volatility

16
How do I qualify for debt?

• Equity Investment

• Strength of Management Team

• Well Defined Technology Space

17
Information Needed to Underwrite Debt

• Business Plan/Executive Summary

• Monthly financial projections
• 18 months minimum

• Capitalization Chart

• Capital equipment budget

• Investor discussion

18
Final Thoughts
Changing Financing Environment
Exclusive Niche Focus
Understanding the Entrepreneur