Silicon Valley Bank 3Q16 Earnings Call Notes

SVB Financial Group’s (SIVB) CEO Greg Becker on Q3 2016 Results

Markets are healthy, record breaking year for capital raising

“Overall, the markets for us and our clients are healthy, despite some lingering impact from the VC market recalibration in the first half of 2016. Venture capital continues to perform strongly, although activity remains concentrated on larger funds and larger later-stage investments. The National Venture Capital Association stated 2016 is on pace to be a record-breaking year for raising capital based on the $32.4 billion raised to date, a quarter of that concentrated in six funds larger than $1 billion each.”

Second biggest year for venture investment

“Likewise, 2016 is expected to be the second biggest year in a decade for venture investment, with $56 billion invested year to date in nearly 6,000 companies. This is despite the decline in completed financings in the third quarter. ”

Early stage is alive and well

“In spite of an emphasis on later-stage companies, early-stage investing is alive and well, although it has been dominated for the last few quarters by a growing group of angels and micro-funds making seed investments. In addition, corporate strategic investments are becoming mainstream as established companies invest in new technologies, products, and delivery mechanisms in order to remain relevant and competitive. In a growing number of instances, we’ve seen entrepreneurs bypass traditional venture capital altogether to accept large strategic investments from corporates.”

Expecting a recovery for early stage companies next year

“We are expecting solid performance with trends similar to those in 2016 and making the following assumptions: continued healthy activity among our clients; gradual recovery by the early-stage markets from the effects of the recent VC recalibration; stable U.S. economy and no dramatic changes in the regulatory environment. At the same time, we expect a low-rate environment and persistent competition to provide continued headwinds.”

Expecting no interest rate increases

“Consistent with our recent approach and irrespective of the forward curve, we assume no market interest rate increases between now and the end of 2017. Nevertheless, we expect solid performance with potential upside if rates do increase.”