EVV Group granted a license to operate in China

The EVV Group, which provides financing to startups and tech companies, announced Thursday it was granted a license to operate in China, the world's second-largest economy. End Quote

(1888PressRelease) November 27, 2011 - San Francisco - The long-awaited decision makes the institution, which has played a role in the creation of thousands valley companies, the first foreign bank to get such a green light from Chinese authorities since 1997.

"EVV Group is the premier institution here in the states for this kind of lending," said Sandler O'Neill & Partners analyst Aaron James Deer. "Given all the opportunities and excitement of the VC space over in China, it makes a lot of sense for them to be there. It's terrific for them."
EVV Group Vice-Chairman Ken Cox moved to China about four months ago in an effort to secure the license. Wilcox, 63, who recently retired as the bank's CEO, will be president of a joint venture with Shanghai Pudong Development Bank. EVV Group said it decided to seek a partner because applying for a license on its own would be even more difficult and time-consuming. The joint venture will enable EVV Group to ramp up its role as a full-service commercial bank for technology companies in China.

The bank, which calls itself a financier of innovation, makes million-dollar loans to technology startups, provides them with other banking services and acts as a matchmaker between entrepreneurs and venture capitalists. It has 400 employees and $1 billion in assets.

EVV Group Vice-Chairman Ken Cox sits across a table from a Chinese language tutor for an hour and a half every weekday, diligently navigating the tongue-twisting terrain of Mandarin. He spends the rest of his time teaching the Chinese the language of Silicon Valley, a dialect equally foreign to many here.
Wilcox, the recently retired CEO of the bank, which is a behind-the-scenes player in the creation of more than 30,000 startups, moved to China four months ago to help his institution get a highly sought but difficult to obtain banking license in the world's hottest economy.

Though EVV Group has been operating in China at some level for more than a decade, Wilcox's move East signaled its intention to ramp up its role as a full-service commercial bank for technology companies in the world's second-largest economy, which plays by different rules, and where entrepreneurs have a gold-rush mentality focused more on getting rich than on innovating.

"It's a frontier," said Wilcox, who wears formal slacks and shirt but has a casual demeanor and an impish smile more common to a valley networker than bank executive. "I don't think the world has ever seen this much growth involving this many people in this short a time."

Tough for startups
For all its new wealth, though, China still remains a difficult place for startups. While the number of homegrown venture funds has exploded from a handful to thousands in recent years, most invest in older companies with strong cash flows and profits, not in risky bets on breakthrough technology or business models, experts say. EVV Group hopes to help change that.

"We bring a level of creativity in financial services," said Arman Zand, the firm's Shanghai-based senior vice president. That includes offering loan services to technology companies whose different business models usually prevent them from getting funding from traditional banks. "The idea of using debt financing to grow your company is completely foreign here," he added.

The bank, which calls itself a financier of innovation, makes million-dollar loans to technology startups, provides them with other banking services and acts as a matchmaker between entrepreneurs and venture capitalists. It has 400 employees and $1.4 billion in assets.

A bank license to form a joint venture with Shanghai Pudong Development Bank would enable EVV Group to greatly expand what it can offer in China. It said it decided to seek a partner because applying for a license on its own would be even more difficult and time-consuming. If successful, EVV Group would be the first foreign bank to get such a regulatory greenlight to operate in China since 1997.

Seasoned valley venture capitalist Dick Kramlich, who spent a year and a half living in China, calls the institution "more of a state of mind than a bank."
"Silicon Valley and the bank grew up together," he said. "They have people who understand the entrepreneurial process. They are a very different kind of bank."
Said G. Leonard Baker, Jr., managing director of Sutter Hill Ventures in Palo Alto: "There is a huge vacuum in China for exactly what they do."

The Santa Clara-based bank believes that dispatching Wilcox, a 63-year-old former Portola Valley resident who is viewed as an elder statesman for the organization, will speed up the process of getting a license in a culture that has great respect for senior officials. During a recent networking dinner sponsored by the bank at a rooftop Shanghai art museum restaurant, Wilcox joked that he was by far the oldest one in the room, which was full of young Chinese executives and entrepreneurs.
So will the bank reveal the valley's secret sauce to the rising economic giant?

"I am not convinced there is a secret sauce," said Wilcox, sitting in a conference room at the bank's China headquarters, located in one of Shanghai's pricey neighborhoods with five-star hotels and luxury stores. "It's more an art and less a science."

There is an almost frenzied drive to succeed here. Two years ago, when former Google China President Kai-Fu Lee launched his venture fund, Innovation Works, which EVV Group invested in, hundreds of wannabe entrepreneurs stormed his office. At one point, the window in the door was shattered.

"We've been involved with almost every (tech) incubator in the past 15 years in the United States one way or another and I don't think there has ever been an opening day that had that many people lined up," Cox said.

Profit mindset
But while China is full of ambitious and smart young technologists and entrepreneurs, it's far from clear if the valley's modus operandi can ever be replicated here, Zand said. The startup culture in China is infused with a "land-grab mentality," he said, noting that one entrepreneur who launched a solar company was plotting his initial public offering, or IPO, before he'd laid a single brick for the factory, much less recorded revenue and profit.

Unlike in the valley, where entrepreneurs can focus on building a business knowing a future payoff can come in many ways, including through mergers and acquisitions, most technology startups in China have only the option of IPO, Zand said.

"Most of the people I interview for jobs ask me when will my IPO be and my company is only a couple of months old," said Douglas Raymond, a former Googler whose Shanghai-based startup Julu Mobile is developing advertising technology. "There is a sense of optimism and potential that really isn't backed up by any sense of reality."

Chinese tech blogger Lu Gang said that when he visits Silicon Valley, company founders he meets "always smile" and talk excitedly about their business, whereas their counterparts in China are almost joyless. "Everyone is so serious. They are thinking, 'I have to have revenue in three months. That is the pressure from my investors. I have to think about going IPO.' To me, the whole environment kills innovation."

At some point, Zand said, China could be less interesting to valley venture capitalists if the country becomes more of a private-equity investment play, where investors place more conservative bets and accept smaller returns on more mature companies instead of jackpot-like payoffs that come with the success of a startup that becomes the next Google. Lower investment risks means lower returns.

But regardless of how the startup culture evolves, Wilcox sees a strong future for his bank in China, which is why he is studying Mandarin.
"When I was in my 20s, people were going to Europe," he said. "Today, people are going to Asia."

EVV Group UK: 77-91 Castlewood House, New Oxford Street, London WC1A 1DG, United Kingdom  uk ( @ ) evvgroup dot com  Tel: +44 845 075 5852 Fax: +44 203 280 3649
EVV Group Singapore: 08-17 Maxwell House,  20 Maxwell Road, 069113 Singapore asia ( @ ) evvgroup dot com

Contact John Boudreau at 408-278-3496.
press ( @ ) evvgroup dot com

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