But a few bankers on either coast were learning that a company's cash flow isn't its only means of repaying loans. For example, a company could get cash from future equity investors. Or it could put up intangible assets as collateral. The old rules need not apply. Banks could create a new model for lending. "Making money safely means that we have to apply common sense to decisions," says Wilcox. "If there is another way to make loans safely, we should do it."
Over the years, as he built SVB's East Coast business, Wilcox proved the validity of the new model again and again. His first principle: If necessary, equity investors can step in and use cash to repay a loan. The second: If investors don't step in, SVB can find valuable -- albeit intangible -- assets to sell.
For example, in the early 1990s, when a client called Autographix went belly-up, its marketing-workstation technology was worthless: PC presentation software had surpassed it. But Autographix had one intangible of great value: a loyal customer base, complete with service contracts. SVB sold that asset for $6 million to NCR in Minneapolis.
Wilcox worked hard to refine his new model and to demonstrate its efficacy. And over time, SVB rewarded him for that work: He was elevated to chief banking officer and moved to Silicon Valley in 1997. Earlier this year, he became president, and he is a member of the executive committee that runs the bank. Nearly all of SVB's loan officers and relationship managers report directly or indirectly to him.
Wilcox puzzles over the value of high-tech companies every day. What he's learned from SVB's experience over the years has given him a good fix on the factors that signal value in a client. Verge Software has the kind of value that Wilcox looks for. Working out of a small apartment in Colorado, Scott Rozic, 26, began developing a Web service that would help companies and individuals to structure and disseminate knowledge. As he sought (and obtained) funding from angel investors and technology partners, Rozic developed his own list of the measures that investors use to gauge value in Silicon Valley. "A lot of intangible value has been codified in Silicon Valley," he says. Breaking that code and then showing that you know how to apply it are essential to securing long-term funding in the intangible economy.
Rozic goes through the list of measures that make up the Silicon Valley code. The first measure is target-market size: It should be at least $100 million. The second is proprietary intellectual property -- in Verge's case, patents that the company is seeking on its software. The third is a sales pitch that includes three key buzzwords: "viral," "Internet," and "monetize." The fourth is the ability to partner with technology suppliers. And the fifth is a set of working relationships with world-class business partners in select fields: bankers, auditors, attorneys, and directors.
Rozic is a just-the-facts kind of guy: He not only knows the code; he knows how to use it to grade his own company. Take the fourth measure: technology partners. Verge has forged relationships with Autonomy, Inprise, Netscape, Microsoft, and Lotus. And there's that all-important fifth criterion: world-class business partners. The company has three seasoned board members, including Stan Meresman, a former CFO of Silicon Graphics, and Mario Rosati, whose name is on the door at the high-powered Silicon Valley law firm Wilson Sonsini Goodrich & Rosati. Among its key advisers are four high-tech veterans, including John Luongo, a former CEO of Vantive, and David Peterschmidt, the current CEO of Inktomi Corp.
As Rozic goes down his list, it sounds like a lot of name-dropping. But Wilcox takes the name-dropping not as a sign of vanity but as a signal of value -- as long as each name is a bona fide member of the company's people network. "Deepening relationships," Wilcox says, "is actually a way of mitigating risk."
In the world of Klaus Buechner, a 32-year veteran of Nortel Networks, a reliable dial tone once meant everything. That electronic purr symbolized the success of the company's hardware, which was used to run telephone networks worldwide. Nortel's new symbol of success is the Web tone, which the company creates by helping customers install Internet-protocol networks that can carry both voice and data.
The Web-tone vision has sent Buechner, 54, on a quest for assets that lie well beyond the borders of its traditional manufacturing base. As senior vice president of corporate strategy and alliances, he scours the globe for brainy engineers and breakthrough technologies that will help Nortel make the promise of the Web tone as much a reality as the dial tone used to be.
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