“We’ll just take your house,” the new account manager threatened with all the swagger he could muster.
We’d been a Silicon Valley Bank customer through the 1990s as it grew from a community bank into a global concern with several billion in assets under management. Our homegrown media company was doing well too, acquiring and starting weeklies in and around Silicon Valley and employing 160. We’d been early to the web, which paid off when USWeb/CKS went public and rolled up all its local offices, including the franchise we operated.
We’d make a million, a modest exit for our investment and work, and another million if we waited a few more days until a stock price spike in the trailing valuation period aged out.
“I’ll sell next week,” I assured the relationship manager.
“Sell by Friday,” he said, “or we call your line.”
Not wanting to see our credit line vanish, we cooperated and sold the web firm for less than we could have a week later.
As soon as we did, Silicon Valley Bank called the line anyway. The dotcom implosion was on the horizon, and the bank needed to shore up its loan portfolio.
Being double-crossed by a “partner” was a tough blow. I’d watched the World Cup games at Stanford Stadium with one of their managing directors and relied on him as a trusted advisor. As we built a digital media company in the mid 1990s, we would get invited to SVB-organized events, where I bumped into the founder of Hotmail in the salad buffet line, and the CEO of the events calendar platform Zip2, Elon Musk.
“Dan, you’re ready for a CFO,” the managing director told me when we went to lunch, and handed me a resume. “This is your guy.”
We hired the charismatic, tough talking finance guy. He negotiated even bigger credit lines with another bank when SVB canceled our borrowing. He stopped issuing financial statements, and when red ink began to flow, he started writing personal checks to the company on payroll days, then checks back to himself as repayment, which an audit later showed added up to more than the amount he’d lent.
The SVB-recommended CFO opened accounts at multiple banks, and one of them called me to alert me to what he believed was check kiting. We were forced to sell our most profitable division, which published six Silicon Valley community newspapers. As soon as the sale closed, the CFO issued a quarter million dollars in checks without the funds to cover them, and emailed me his resignation. “I’m sorry to leave you in this position,” he apologized.
The young account manager who misled us about the credit lines was promoted to one of Silicon Valley Bank’s top officers and was making a $3 million annual salary when the institution imploded on Friday.
Silicon Valley’s yin yang plays out in idealism wrestling with toxic, ethics-challenged greed. This week the devil stood on the shoulder for all the world to see. I wonder how many other entrepreneurs and enterprises were damaged over the years by the irresponsible behavior and bad advice dispensed by a bank that became an international embarrassment to our valley last week.
Dan Pulcrano is the CEO of Weeklys.