2 min read March 2021 — Wells Fargo, a leading financial services company serving 10% of all middle market companies in the United States, supports approximately 2,000 clients in the commercial technology space. In an interview with Invest:, Head of Technology Banking Tom Harper shares his insights regarding how tech companies have performed throughout the pandemic and what tech companies should keep in mind when partnering with a bank.
How have your technology clients performed throughout the pandemic?
Our business is focused primarily on software and fintech. We also cover hardware, internet/e-commerce and clean tech. On the whole, the entire tech ecosystem performed very well. Our two main industries, software and fintech, have done very well as of late. Although the ecosystem took a pause early in the second quarter as our venture capital counterparts and our customers tried to figure out how they were going to work their way through COVID-19, it has rebounded very quickly. Our clients in the travel and leisure industry were negatively impacted during the pandemic but a lot of sectors experienced phenomenal growth. Because we provide support to their operations via our systems and offerings, we experienced the same lift. The VCs were there to support their portfolio companies and the portfolio companies hunkered down early to preserve cash flow. I read a Jones Lang LaSalle (JLL) study using Crunchbase data that indicated venture capital investment in the local region totaled a healthy $1.6 billion in 2020. That was down a bit from 2019, which included one outsized transaction that skewed the data. It appears that many sectors have emerged in an even better place. For instance, our ed-tech and enterprise software clients have experienced very good growth with everyone working from home. We’re there for them, and we’re positioned to navigate the road ahead alongside our clients as the pandemic continues to impact certain sectors.
Everyone is talking about valuation. That’s the big buzz within the technology space in particular. We’re seeing valuations where we haven’t seen them before and a lot of that has been enabled by COVID-19 and taking dramatic leaps forward. Some companies have taken a five- or 10-year leap forward as a result of the pandemic. In many cases, our clients are benefiting from that.
What differentiates your division and bank from competitors?
Wells Fargo is focused on starting with tech companies in early stage funding and staying with them as they grow. My team is situated within our commercial bank as a specialized business and is one of 18 different specialized businesses supporting middle market companies. Our bankers are required to have specialized conversations for different stage entities and to study the spaces that they’re calling in so they can deliver value-added insight. The objective is to be a resource to our clients, and I think that’s how we win. As a banker, you don’t want to compete on price or a more risky structure to win. You want to be providing value for the client today and for years to come.
What characteristics should tech companies look for in a bank?
Tech companies should find a bank that can be a resource and grow with them. It is important to work with someone who understands their business and challenges, especially in a pandemic environment where their challenges are changing almost daily. This space is changing every day, and there are a lot of disruptors out there. You want bankers who are on top of that and can provide a consultative relationship.
The other piece that is important, particularly if you’re successful, is that you want to be banking with an entity that’s scalable. Yes, many banks have good products but as you grow, you want a bank that can grow with you. That’s not just providing capital when you need it or getting you access to private or public funding, you want scalability. You don’t want to switch horses after your fourth round of funding when you realize your bank can’t keep up. That’s where we excel.
What makes Philadelphia a great location for fintech firms?
Fintech, particularly through universities like Drexel, is growing in Philadelphia. Drexel and other universities that focus on STEM are producing great talent. Venture capital firms aren’t just following founders, they’re also identifying regions of talent that will allow companies to scale. This neighborhood in particular has a number of schools that focus on STEM and provide that talent. Just like everyone needs water, as fintech companies grow and scale they need technology, and they need people who understand technology to help them build out their platforms. Philadelphia is also in close proximity to New York and other capital centers and we’re a less expensive place to do business. We have a lot to offer here.
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