Interview with the head of Bridge Bank's Technology Banking Division

Mike Lederman of Bridge Bank - Podcast Transcript

Scott:	Hey, it’s Scott Orn at Kruze Consulting, and welcome to another episode of Founders and Friends. Before we start the podcast, let’s give a quick shout out to Rippling. Rippling is the new cool payroll tool that we see a lot of startups using. Rippling is great for your traditional HR and payroll. They integrate very nicely. But guess what? They did another thing. They integrate into your IT infrastructure. They make it really easy for when you hire someone to spin up all the web services in their computer, which sounds like not a huge deal, but actually we did the study at Kruze. We spend $420 on average just getting a new employee’s computer up and running and their web service up and running. It’s actually a really big deal, saves a lot of money. And the dogs are eating the dog food. We see a lot of startups coming in to Kruze now using Rippling. So, please check out Rippling. Great service. We love it. I think we have a podcast with Parker Conrad. You can hear it from his own words, but we’re seeing them take market share. So, shout out to Rippling. And now to another awesome podcast at Kruze Consulting’s Founders and Friends. Thanks. (silence)
Singer:	It’s Kruze Consulting Founders and Friends with your host, Scotty Orn.
Scott:	Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting. Today my very special guest is Mike Lederman of Bridge Bank. Welcome, Mike.
Mike:	Hey, Scott. Thanks for having me.
Scott:	My pleasure. Well, you are, I think, a second-time guest. Right?
Mike:	I am. It’s been a number of years though, so good to be back with you.
Scott:	Well, my pleasure, man. Well, maybe you could just refresh the audience and tell them how you came to Bridge Bank, what you saw there. We were talking before I turned the mic on. It’s been a while. It’s been pretty amazing how much growth Bridge Bank has had since you joined.
Mike:	It’s been a lot of fun to be here for so long and see the growth and the success that we we’ve had. I started with the bank in 2003, so a very, very long time ago. Bridge Bank was a community bank in the Santa Clara area, and we grew very, very fast and one of the fastest growing banks in the country over the course of the next 12 years until we were acquired by Western Alliance Bank in 2015, which ended up being a phenomenal event both for employees and clients and shareholders in terms of what the combination of the combined bank was able to do. So, in 2015, at the time of the acquisition, we were 11 billion in assets and just announced yesterday crossing the $50 billion threshold in terms of asset size, which puts us in very nice company here with other banks in the country.
Scott:	That’s incredible. Fifty billion, five zero. Amazing. I mean, that’s crazy, man. Good for you. You picked the right horse a long time ago. Sometimes it’s easy to hop off the right horse, but you stayed on the right horse. Good for you.
Mike:	Yeah, thankfully I have. And we’ve got a great team with a lot of continuity on our team and a lot of people that have been here for a long time, which has been a key to our success. And as we’ve grown, we’ve been able to recruit and hire top bankers across the country in different markets and add their networks and their area of expertise to our team. All of that has contributed to where we are today. So, it’s been a good time.
Scott:	That’s something you should talk about for a second because, I mean, when I met you and Bridge Bank, it was really a Bay Area phenomenon, which is where a lot of the startups are. But the startup ecosystem has expanded dramatically really across the country, across the world the last 10 years, and you guys have mirrored that. Right? What’s been the growth? How have you spread out? What was the strategy behind that?
Mike:	Yeah, the key for us… And we’ve always had clients all over the country and we do our best to manage our day-to-day relationships with clients, both loans and deposit relationships, in the closest geographical office where the client is located. We’ve been able to do that successfully by hiring top-tier bankers in market, people who have a network, no technology banking, no commercial banking, and have been able to plant that flag for us in different geographies and then recruit and hire a team to help support our client and expand our client base in that market. So, over the last few years, some of those geographies that we’ve added include Denver, Seattle, Austin, Chicago. We recently announced we’re opening a new office in New York. So, it really puts us in every major tech hub around the country with leadership in each of those markets that has been there and done this before and is the right person in each of those places to lead the charge for us.
Scott:	That’s beautiful. I do like the local leader, too, because the startup world is just so relationship intensive. It actually really works for you if you’re good at what you do and the startup ecosystem rewards you. And so, picking that person in Denver or Seattle or Austin or Chicago or New York, that’s really good because you get to really piggyback on their relationships and their knowhow. So that’s smart strategy. I like that.
Mike:	That’s exactly right. People ask us all the time how we differentiate amongst others in our space, and how we manage our relationships to me is the number one way we are different. We have a single point of contact for our clients in each of those geographies. So, when you come to Bridge Bank as a Series A company, you’re going to be working with that same team throughout the entirety of your relationship with the bank. And that person is in your geography, in your time zone, and is hopefully someone and ideally someone that you use for things beyond questions about banking. We want you to ask us when you want introductions to VCs or, of course, temps, CFO, and accounting firms, and attorneys and use our network to help you. We want to have this be a relationship, not just a banking transaction. And we do that by ensuring that people have their relationships with the individuals at the bank, not just with the bank, and that’s that continuity in the relationship management in region, which in our opinion sets us apart.
Scott:	Yeah. I love the single point of contact. That’s really nice. I’m like that too. I want to have the functional expert for every aspect of not just my work life, but my personal life. And so, having that one person’s cell phone number, email, you can call and you know they’ll fix it is like really, really valuable. Maybe talk about Bridge Bank’s capabilities real fast. Because I think that concept of the single point of contact segues or is helpful to overlay over some of your products and services you offer. Because then we can talk about why it matters to have that single point of contact.
Mike:	Bridge Bank offers products and services to meet a technology startup’s needs at all stages of their life cycle. It starts when you incorporate and we want you to bank with us at that stage. We have a program that we call Bridge to Growth, which is essentially free banking, no fees on account analysis, free services for companies. The reason for that is we want you to test us out. We want you to come here and teach us, let us learn you, and understand our online banking platform, the products and services that we offer a company as they grow. That enables you to have that relationship when you’re ready for venture debt down the road and from there, when you’re ready for working capital financing and longer-term growth capital as the company continues to mature. And again, the key here is all within the same team. There’s not a team that you talk to at the front end and another team that comes in from behind the curtain after you sign on the dotted line. It’s the same person. And it’s the same person, whether you’re a Series A company or whether you’re publicly traded and everything in between. And we’ve got quite a few success stories here of companies that have come to us very early in their life cycle, worked through all sorts of different products and services that a company needs as they grow with range from, as I mentioned, Series A venture debt to a working capital line and longer-term growth capital to pre-IPO financing and then servicing companies post-IPO as well.
Scott:	I can see the advantage of it in a couple different ways. First, you mentioned Bridge Bank’s willing to make investor intros or lawyer, accounting, whatever intros. But if you’re a banker and you’re making that intro to a venture capitalist who you work with a lot, you’re putting your name on that intro. So, they need to have confidence in the company, and they’re only going to have confidence in the company if they work with you all the time and have seen you go through some ups and downs and things like that. So that’s one way I see the relationship really paying off. The other one is on the lending side because sometimes… I’ve seen this because I used to work in lending, as you know, and we were that way, too, at Lighthouse. You have one person you’re going to work with forever. But I’ve seen other times where people take a loan from a bank or a fund, and the happy smiley person you were working on the front end with has disappeared and they are now running after other companies to lend to and now you’re dealing with this very difficult credit person or [crosstalk] person who doesn’t care anything about what you do, doesn’t even know what you do, and can’t really be flexible when you need it or add on when you need it. So, I think, especially in the lending side, I can see it being a really huge value.
Mike:	It is. We ask people after we close along with them, we’ll say, hey, you had many options. And in this market, every company has multiple options to choose from. So, we ask why they chose us. And the number one answer by far is we dug in and understood their business from the beginning, number one. But number two, we also developed a relationship with the management team and/or the investor syndicate that showed that we understood their business, that showed that we were going to be that right partner. And again, I feel like a broken record saying it, but because it is unique in our industry, that single point of contact throughout the entirety of the relationship with the bank, that’s the key point here. And that’s what we offer. If people were to ask me what our number one key to success is it, it’s continuing like that so that we know the good, the bad and the ugly with that company. As much as we’d like to see all companies go up and to the right, we all know that’s not the case every time. So, when we have that history and we have that relationship, it helps us be a better partner.
Scott:	Yeah, that makes so much sense. There’s another thing you talked about which I really like, which is you talked about from inception, the company gets formed and being the banker there all the way through IPO. And that’s pretty new for Bridge Bank. You didn’t used to have that IPO, super late-stage capabilities. Is that a function of the acquisition or the partnership of Western Alliance or is that just the bank is broadening out its product suite? How’d you get to that point?
Mike:	Yeah. I’d say it’s both. For many years, Bridge Bank provided loans to technology companies, but many times they were asset-based in nature, such as accounts receivable or inventory or some semblance of enterprise value lending. This is going back 10 years plus. Over the last number of years, we’ve really expanded our efforts on both ends of the spectrum, meaning Series A venture debt, so that we are the incumbent when a company is looking for additional credit facilities over time. Changing banks can be viewed as a time suck. We don’t think it is, but many times that is the view, and so we want to work with companies as early as we can, starting at inception, starting at the time they get that EIN number. We want you to call us and use our Bridge to Growth product that enables you to have a bank account and start a relationship with us so that we’re that partner when you grow. But again, continuing that theme of single point of contact and ongoing relationship management, companies are going public and we are now part of a bank that enables us to have the size to meet those needs as a company grows. That’s where the Western Alliance component really comes into play. Because we’re a larger bank, we have a larger legal lending limit and we can hold larger credit facilities. As you know from your time at Lighthouse, if we can’t do it all on our own, we’re going to work with a subordinated venture debt lender at times and/or syndicate with other banks depending on the nature of the situation.
Scott:	That makes tons of sense that now with the deeper pockets and hitting the $50 billion mark, you can… Yeah, it just makes sense that you can do bigger loans, hold bigger loans on your balance sheet. That’s what later-stage companies care about-
Mike:	Yeah.
Scott:	… So that’s really cool. You don’t always hear about acquisitions, especially in the banking industry, being all that great. I mean, I was at Hambrecht & Quist when we were bought by Chase JP Morgan, and it ended up working well, but it was a little bumpy. But oftentimes the company that was acquired doesn’t get that many benefits. It usually accrues to the acquirer. But it’s great that the Bridge Bank client base, the Bridge Bank team is actually getting a lot of leverage and new capabilities out of that acquisition.
Mike:	Yeah, it’s been a win-win all around. As I mentioned earlier, employees, clients, and shareholders, it’s really been a big success everywhere. And it’s all one bank, Western Alliance Bank. Bridge Bank is a division of Western Alliance, so we’re all on the same team, and it really enables us to be much more efficient in how we approach things and also have the resources to make sure that we’re successful at it.
Scott:	Hey, it’s Scott Orn at Kruze Consulting, and before we get back to the podcast, quick shout out to ChartHop. ChartHop is one of my favorite new SAS tools on the market. Basically, what ChartHop does is it puts your org chart in the cloud. And I always like to say it brings transparency to your organization, and so everyone in your organization can see who they report to, they can see the full org chart of the company and how their group relates to other groups. It also has a lot of information on the individuals in the company. So, you can click on the ChartHop profile and just get where people live, their experience, slack handles, all this stuff, and it’s just a really great tool. The other thing is ChartHop has started doing some cool stuff around compensation and budgeting planning. So, you can actually start seeing what the cost structure of the company will look like during certain scenarios. So, I’m loving chart. Check it out, charthop.com. We use it at Kruze. I really like it and I can’t recommend it enough. All right, back to the podcast. Let’s talk about the venture debt world because that’s one of the areas that I see you being super strong in, especially… I think people know this, but there’s banks that do loans to startups and then there’s funds, and I see you at Bridge Bank as one of the premier bank lending institutions. Is that something where you talked about it being asset-based lending in the early days, but it seems like you’re doing more growth capital lines and just more flexible capital? I mean, was that a conscious decision to start doing that?
Mike:	It absolutely was. It was a conscious decision. It’s where the market is right now and we’re certainly part of it. So, I think over the last number of years, banks are doing a lot more venture debt than maybe we used to, but there’s still certainly a great need for the non-bank venture debt lenders as well, both in addition to what the banks do as well as in many cases instead of. But when we have a venture-backed company, and it absolutely could be pre-revenue, the key for us is having institutional equity sponsorship ideally with a fund or a partner that we’ve worked with before and/or a management team that has done that before, we’ve worked with before. That always makes it easier. But we certainly want to be involved in all of those discussions to see how we might be able to be helpful. So that is not new anymore, but newer relative to the history of Bridge Bank for us to be as involved in that side of the market. But it’s been a good success so far and really has enabled us to, again, going back to starting these relationships early and helping them grow over time.
Scott:	Yeah. And you talked about the point of inception, C stage company comes into Bridge Bank and maybe they go on to raise a Series A, what’s the lending criteria on that Series A company? You talked about the institutional VC support. Are there other things you’re looking for or evaluating? So as always, right, it’s the market, it’s the management team, it’s the product, product-market fit, as it is known, but a lot of it is certainly based on the equity sponsorship and what type of runway a company has. We provide debt to extend runway between equity rounds. That’s to me what venture debt is. It’s not to replace equity, it’s to extend the runway from the equity. And that can be a key as well. We do get those requests from time to time. I don’t want to raise equity. I want to do this all with debt. There is a time and a place for that, not always with a traditional venture debt loan. But I think one of the keys for us, and other lenders do this as well, but one of the keys for us is certainly we don’t have a one-size-fits-all approach. We’re going to take each opportunity as it comes, try to figure it out as quickly as we can, and if we can’t be the right partner, we’re going to let a company or an investor know quickly. We’re going to tell them why and we’re going to hopefully have a referral or two to make to a resource that might be better suited for what that company is looking for. I love that because, A, you’re helping them get funded no matter what, but, B, sometimes companies taking on debt when it’s not appropriate can really get themselves in trouble, and there are lenders out there that really honestly just don’t care. They just want to do the deal and they’ll figure it out later. So, there’s a level of thoughtfulness I really appreciate. But also, it’s very hard to do a startup just on debt. I would never recommend that. So, taking the long view and also working in conjunction with those VCs, The Sand Hill Road, New York, LA VCs. To me, that’s a good partner. You’re just doing the right thing every time, and I value that quite a bit.
Mike:	Yeah. And I think you’re not alone there, Scott. I mean, I feel we hear that a lot. It’s odd to have people thank you when you tell them you can’t help them, but that does happen. And not only does that happen, some people start banking with us even if we can’t provide the debt because they’re appreciative of how we managed the process, made the right introduction, things like that.
Scott:	I do think you probably do a combination of the deal people plus the underwriting or credit people, but I’ve seen you be… Aggressive is not the right word because it’s smart aggressive. There’re lenders who just throw out a big number and, again, they’ll worry about it later. But I feel like there’s a lot of insight. There’s a lot of thought that goes into the actual underwriting and what the appropriate amount of debt is for a company. We’ve sent a bunch of companies over to you and it’s always been a good situation for the startups. So, it’s a good operation. People get what they deserve when they work with you, and you’re not maxing them out or doing anything crazy, but you’re also giving them that extra runway that they can really use. I think there’s a lot of value in that. An extra three months, an extra six months of runway to improve your metrics or just make more progress is really, really valuable to these startups.
Mike:	It certainly is. And, yeah, a lot of, I think, where we tend to add value is we’re not usually going to be the first term sheet in. We’re usually not going to be the cheapest option. However, what we are going to do is do some more diligence up front so that we have a certainty to close.
Scott:	Yeah.
Mike:	We know that once we get to a term sheet that we send to a company, we know we’re going to deliver upon that. That, I think, is very well received by our clients and by their investors who know that when they get a Bridge Bank term sheet, it’s been vetted and that we’re going to deliver on it subject to confirmatory diligence. And again, we’re going to tell them quickly if we’re not the right partner and why.
Scott:	The certainty clause is so valuable. There’s nothing more embarrassing for a management team than to have a signed term sheet, the board’s counting on it, you’re starting to make plans to spend that money or hiring people in advance, and then for the deal to fall through. It’s a really good point to bring up. That really, really matters. That’s also where the relationship value and the one point of contact comes in, too, because that’s really not going to happen if you have a good relationship with your banker. It shouldn’t happen outside of a September 11th, Lehman disaster scenario. You should be able to rely on that person. If that person is that person’s smart, they’re not going to overextend themselves internally with the credit committee and things like that. So, I value that. That’s actually really, really nice.
Mike:	Yeah, it’s all related and it goes back to what we started about talking earlier, which is hiring the right people in market to lead our teams. Our reputation is everything. This is a relationship business. And if we don’t do what we say we’re going to do, we’re not going to get that next referral from that investor or get to work with that CFO when he goes to his next company.
Scott:	Yeah.
Mike:	And that’s very important for us to maintain that relationship, keep our reputation strong and make sure that we follow up with what we say we can do.
Scott:	I totally agree. Well, you’ve been a great partner to Kruze. You’ve been a great partner to our startup clients. I’ve known you for a long time. You’ve always delivered. So, I really appreciate it and that’s why I wanted to have you on the podcast. But maybe you could tell everyone where to find you, how to reach out if they want to work with Bridge Bank.
Mike:	Yeah. Well, thank you. So bridgebank.com has all the information that anybody would ever want and more about who we are and what we do. My direct phone number (415) 230-5680. Email Mike.Lederman, L-E-D-E-R-M-A-N, @bridgebank.com. Either myself or someone on our team would be more than happy to talk to anybody that has an idea about what they’re looking for or just wants to brainstorm about ways we might be able to be helpful.
Scott:	I love it. Thanks, Mike. Thanks for the partnership. I’ve interacted with a bunch of the folks at Bridge Bank, too, that work in your group and they’re just really top-notch people. So, I can’t say enough, and I really encourage all the Kruze clients and anyone who’s listening to us in the startup ecosystem to reach out. So, thank you for everything you’ve done for us and for our clients. Really appreciate it.
Mike:	Great. Thank you, Scott.
Scott:	Bye, man. Take care.
Singer:	It’s Kruze Consulting Founders and Friends with your host, Scotty Orn.

Interview with the head of Bridge Bank's Technology Banking Division

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