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BUSINESSMy article appearing in South Bay Accent magazine: Banking on John Dean The tech investment game was on. The silicon chips were on the table. And John Dean was banking on himself. He bet the house. Having just rescued Pacific First Bank, Dean rode into Santa Clara as a hired gun, a.k.a. the new CEO of Silicon Valley Bank (SVB), to save the bank from bad-credit desperados. He would have to gamble everything--home, career, reputation--on his keen eye for deals in the entrepreneur's game. His SVB predecessors at the table had left Dean with a poor hand to win back the pot. Although SVB was a legend in the late '80s as one of the country's fastest growing small banks, it was too aggressive in making new construction loans just before the economy tanked., and a recession paralyzed real estate development. By 1992, as the property rush was waning, SVB was panning for fool's gold. Nearly half of its investment portfolio was locked up in faulty real estate funding. Speculators moved on to other get-rich-quick schemes. SVB was becoming an investor's ghost town. That's when John Dean arrived. "I've always liked the role of the guy in the white hat," Dean says today, twelve years later, "so I was ready for the responsibility." The volatile Valley SVB's predicament was not so extraordinary, when you consider the cataclysmic changes the Valley has experienced in the last dozen years. The early '90s dot.com market had frenzied investors handing big bills to entrepreneurs with sexy IPOs like loopy conventioneers over-tipping Hooters waitresses. When the Internet market inevitably flopped in March 2000, venture capitalists were left holding bogus receipts, with a lot of explaining to do on their expense accounts. Also during the decade small "boutique" banks proliferated, flashing capital and fancy portfolios. But big banks hogged their turf, then bought up the "little-banks-that-could," including the Montgomery and Robbie Stevens institutions, frustrating innovation. Local manufacturers then cranked out tried-and-true chips, software, and PCs by the pallet-load, resulting in a 21 st century glut of gizmos and lack of liquidity. Today, Valley business leaders who aren't scrooging profit margins from downsized staffs are hedging the Valley's future in unprecedented export production. A few Valley stalwarts, however, have remained at the helm of its VC groups, banks, and CEO class. Leaders like Mike Moritz of Sequoia Capital, one of the first professional investors in nascent start-ups Yahoo and Google, and Brad Koenig of Goldman Sachs, perhaps the Valley's all-time big spender on IPOs, have paved the way for leaders who still have stamina for the twists and turns. One of them, prized for his determination and foresight, is Dean. Over the years, Dean has become something of a weathervane for the Valley's winds of change. Some peers even base their business plans on his industry forecasts. Dean remains vital in the industry through investing in funds-of-funds, venture capital funds, and start-up tech firms in Silicon Valley and Hawaii. Dean also speaks regularly at tech and investment conferences, supports nonprofit business education programs, and leads entrepreneur foundations. Dean's fearless leaps of logic (some say faith) have always been his nature. He has had his knocks; but Dean hasn't just learned from his mistakes, he has taught others how to avoid dumb decisions. Tina Fitch, CEO of EzRez, a travel industry tech start-up says, "John Dean provided us with invaluable feedback and guidance from his practical experience on human resource issues, contractual terms, partner negotiations, and finances." And the CEO of software launch H5-Technologies, Nicolas Economou, concurs. "Like many recent early-stage start-ups in the Valley, we hit bottom in 2002, suffering crippling investor default," he says. "But John Dean's clear reasoning helped us avoid endless, unproductive circular thinking; he has the startling ability to identify what truly matters." Having often defied convention and worked wonders in saving and rebuilding Valley companies, Dean was sure back in 1992 that he would be the solution for SVB's problems. The Feds move in "We were under a federal 'Cease and Desist Order,'" recalls Blake Baldwin, the bank's new head of the real estate division when Dean arrived. "The FDIC threatened to shut us down, and have its regulators run the bank. We were pulling our hair out trying to solve the problems." But months of gloom were about to clear. "When John appeared, he understood the nature of our problem immediately," Baldwin says. "And John had enthusiasm for our prospects; he began to restore our confidence." With Dean playing his cards, SVB had hope. More than merely feeling lucky, SVB believed it had an ace. And Dean was upping the ante on the emerging tech business. Putting up much of his own assets in shaky SVB stock, he would play with the house's money, going for broke investing in companies revolutionizing computer chips, software, and the Internet. Baldwin was one of several executives to interview Dean. He remembers warning Dean about the bank's stunning $30 million deficit. And Dean snickered. "I was a little surprised at first," Baldwin says, "but I soon realized John was smiling with confidence. He had done his homework on us. He knew all about our 'little real estate problem,' as he called it." Baldwin also notes that Dean showed a flair for the dramatic. "John said he liked our past success, saw our future potential, and was eager for the challenge to work in Silicon Valley. He told me he had already turned down a CEO job offer from a much larger bank (with 10,000 employees) just to talk with us. He added that he had recently solved another bank's $500 million problem, so he was sure to get us back on track. I felt we had no choice but to trust him." Before "chasing the money" during the real estate bonanza, SVB had been a slow-and-steady local bank with a balance of investments in a portfolio of commercial, tech, and real estate clients. Tilting in the '80s toward real estate funding had cost the bank much of its other businesses. SVB officials were woozy with the sway of great gain followed by great loss. The bank seemed only interested in stability. Dean's solution? Swing the pendulum again--this time throwing all the weight over to the tech clients. It was a bold move only a seasoned risk-taker like Dean could suggest. For some, that meant their own exit from the bank, voluntary or otherwise. "I left because I couldn't see being around for another big-idea, little-action investment disaster," says one middle manager in the maligned real estate group. "Even though I hung in through the rough times," says another disparaged member of the group, "I was fired because of my association with the old regime." But Dean's plan--or the luck of the draw--was perfect timing. In repositioning staff, departments, and investment goals, Dean had prepared SVB for the coming Internet Revolution of 1995--and its hungry entrepreneurs. Each twenty-something e-biz wiz needed weaning from a bank that could spoon him gobs of venture capital. As an eager and astute incubator of emerging tech companies, Dean soon made SVB the small bank leader in taking deposits, making loans, acquiring stock options, and guiding the highest-potential new tech businesses. (In his seven-year tenure, Dean would fulfill his promise in seeing SVB grow its assets from $935 million to $5.5 billion, employees from 235 to more than 1,000, and market cap from $63 million to $3 billion plus.) Resurgence in the Valley Should people nab NASDAQ now? "I don't see quite the hyperactivity of the tech heyday in the late '90s," Dean says, "but today's pace is good for sustained growth and market balance." Dean suggests people plan their investments over a long period of time (choosing index funds and bond portfolios)--and avoid reliance on the high end of the market. "Invest your nest egg wisely but deliberately," he urges, "and diversify your portfolio." As for the hot-button issue of the economy, the increased offshoring of domestic jobs that could drag our recovery, Dean believes the U.S. should pressure foreign countries to grant better access to their markets "so their consumers will buy more of our manufactured goods." And the federal government should also "negotiate more favorable exchange rates," he adds. But early-stage companies are offering hope. "There's a gap right now in the marketplace," Dean says, "for small but focused companies to succeed with as little as a $1 to $2 million investment of their start-up." Dean is optimistic that the worst is over. "The market correction has cleared out most of the bad business plans left in the pipeline and made room for the better ones coming along." Internet. "Surprisingly," Dean says, "this space is making a comeback." With the dot.bombs a fading memory, the wiser survivors are part of innovative--and well-funded--online businesses (many are tied to existing corporations as "click and mortars"). While still making up a small fraction of total retail sales, the boost in sales for the e-Bays and Amazons is impressive. And, as they say, invest where you shop. Security. "This is a no-brainer," Dean says. The Patriot Act has everyone hopping; from transportation to corporation, software companies are designing hundreds of profitable new protection systems. Take a sneak peek. Biotech. Genetic research leads the way among cutting-edge bio studies. Successful new biotech companies are providing scientists with tools for "faster, more accurate, more reliable, more consistent assessments and recommendations," Dean says. There's something missing in your DNA if you overlook this industry for investing. Dean's legacy as a banking services risk-taker, rescuer, and relationship-builder has served him well throughout his career. He's a realist, too. So you can take him at his word when he's pointing out the next financial steps for an individual, a company, or the market. But always humble about his success, Dean admits you can only play the cards you're dealt. It's clear Dean's still got the hot hand.
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