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Silicon Valley Bank headquarters in Santa Clara, Calif.

/The Canadian Press

Canada’s banking regulator has granted Silicon Valley Bank a licence to operate in the country, clearing the way for the California-based lender to solicit business and lend to technology and life sciences companies north of the border.

The Santa Clara-based bank, also known as SVB, has US$57-billion in assets and caters to high-tech and life sciences companies from early-stage startups to more mature businesses. Although it has offered some cross-border services to Canadian companies with U.S. operations for more than a decade, it faced restrictions without a banking licence. Until now, SVB was barred from advertising in Canada and had to tread carefully when meeting new clients or sponsoring local events to raise its profile, for fear of irking the domestic regulator.

SVB has said it chose to formally set up shop in Canada to drum up more business from the country’s burgeoning ecosystem of technology and heath-care startups. The pace of growth in the sector has picked up, with Canadian venture-backed companies raising a record $3.5-billion in 2018, according to PricewaterhouseCoopers LLP. At the same time, competition to serve those companies among banks and venture capital firms has driven down the price of debt.

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SVB’s new Canadian headquarters in downtown Toronto gives it a physical presence near the Bay Street financial services hub and proximity to the Kitchener-Waterloo tech corridor. Since about 2000, it has been lending to Canadian clients with U.S. operations, providing what’s known as suitcase banking services from offices in Boston and Seattle. Its client roster already includes retail merchant software-provider Shopify Inc., online lender Borrowell Inc. and pharmaceutical company HLS Therapeutics Inc., for which SVB recently led a joint $125-million financing.

For the time being, SVB will only offer lending services in Canada, but will provide additional services for companies that expand to the United States, said Barbara Dirks, head of Canada for SVB.

“The licence now gives us the ability to have feet on the street in Canada,” said Ms. Dirks, a former senior vice-president at Royal Bank of Canada who also spent 15 years at Bank of Montreal. “As we see more commercialization of Canadian companies, we also believe there needs to be more funding choices,” she later added.

The bank expects to make its first fully Canadian-based loans in the coming months (it won’t accept deposits), and has set a target to serve about 40 per cent of all venture-backed companies in Canada within a few years. SVB claims to have relationships with about half of all such companies in the United States. But it faces a more crowded and competitive Canadian tech banking sector.

U.S. lender Comerica Inc. has a long-standing presence in Toronto, and the new CIBC Innovation Banking division at Canadian Imperial Bank of Commerce has been expanding rapidly, adding dozens of clients since it launched last year – including a $50-million financing deal with Hootsuite, which is also an SVB client. That has put pressure on rivals such as Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal to respond. And venture debt firms such as Espresso Capital have been growing in prominence.

Even so, “we continue to hear from founders that there is a need for funding,” Ms. Dirks said. Roughly 80 per cent of Canadian startup executives still say the fundraising environment is either somewhat or very challenging, according to a survey by SVB. And more than half of businesses surveyed by the Business Development Bank of Canada (BDC) last year said lack of access to working capital or capital to grow kept them from seizing opportunities.

But that’s expected to change as banks see greater opportunity in industries that have typically been seen as risky credit, and companies and governments pour hundreds of millions of dollars into developing artificial intelligence and clean technologies.

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To compete, SVB plans to emphasize its 35 years of experience banking early-stage, innovative companies and its broad network of contacts, from Silicon Valley to outposts in London, Ireland, Germany, Israel and China.

The bank is hiring, looking to significantly add to its Canadian staff over the coming months. For much of the past year, nearly a dozen local staff have been focused on setting up the bank’s Canadian operations, from policies to controls, and proving its readiness to the regulator. That process was “thorough,” Ms. Dirks said, and took longer than expected – The Globe and Mail reported SVB first applied for a licence in the spring of 2017.

“The growth curve is really picking up. And so while that’s happening, we’ve obviously been working through the regulatory process,” Ms. Dirks said. “It would have been great to have the licence even earlier because of the incredible growth that’s happening.”

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