Writer: Casey Troyer
Angela Pierce: What types of deals do you specialize in or like to do best?
Doug Mangum: I like to work with technology companies that have entrepreneurs with prior success in some fashion. Whatever their passion is.
Angela: What makes a loan attractive to you? What do you look for?
Doug: If it’s early, I look at the vision the entrepreneur has to accomplish what they desire. In order to make it worth my time, they should have thought through the business plan so that it gets some sort of funding along the way. If I were going to provide some advice to that entrepreneur, I would advise them to provide a one-page summary of their business plan that includes some sort of financing along with that plan. Whether it’s capital they have or plan to raise from friends or family, every plan needs some form of capital to make it work.
Angela: Right. So, what about more advanced companies who have gone through processes like this and have some base of earnings or capital in it? What do you look for in those companies?
Doug: If a company is at a more mature level, then I start by looking at whom that entrepreneur is surrounding himself or herself with. So, at that point they would need to have what I would typically call a “Chief Operating Officer” or someone who has the vision to help the entrepreneur deliver. That’s even more important than a CEO, I think. They will need someone who has a little more seniority who can advise how to get all of the financing, legal, and accounting lined up.
Angela: So, if a company came to you, what would you expect them to know or have prepared, aside from the business plan? What other kinds of information would you want them to have before they talk to you?
Doug: The technology group that I’m in at Wells Fargo has a broad range of companies’ lifecycle that we can work with. We can work with the very early stage companies all the way to the later stage companies. You might think of us as working with more mature companies and we do, but we also have early stage companies we work with, as well. So in those early stage companies, if the business plan is good we would like to see what the forecast is from a financial standpoint. What I will often do is challenge the sender of the information with the assumptions in the forecast. So, really what I expect is for them to have assumptions in the forecast. Every start-up company I’ve ever seen shows zero to—
Angela: A hockey stick. [laughs]
Doug: Yeah, zero to twenty million in three years? [laughs] It never really happens that way. So, I would challenge that person to put some assumptions around year one and year two. Then, I would challenge that assumption with a little dose of realism, because I’ve seen several companies present and then I’ve seen them demonstrate, and it very seldom hits that forecasted number. So, why not challenge someone upfront?
Angela: So if someone wanted to reach out to you or someone like you, what would be the best way to approach? And how would this person know they have found the right group or banker?
Doug: That’s a good question. At a large organization, what often times happens is that companies approach a local branch or business banking unit and they get started with well meaning people, but it’s the wrong fit. So if you’re a technology company you have to find someone who is familiar with the technology company process.
Angela: Right, so every bank is going to be different, but it’s important to find the right group. You don’t want to just walk into a local branch and get lost in the shuffle.
Doug: Right, they’ll get lost and end up roaming with people that will do their best to take care of you, but you have to find the right people for your company.
Angela: So, probably for any industry, whether asset based or real estate, there’s something special about the way your particular business works, and you have to find the right fit.
Doug: And the difference with Wells Fargo and some of the other larger banks is that we are very well accustomed to working with non-technology companies which are much easier. Every [technology] relationship we have, there is no collateral, its either cash flow, IP, or the Venture capital firm is going to provide future equity support for their request.
Angela: So for a technology company, the best requirements would be a large investor to come along side?
Doug: Yeah it’s real simple. The company is going to burn through a couple of years to get where they need to be. That’s fine. That’s the way most technology companies are done, but you have to have a funding source from (usually) an outside investor.
Angela: What are some of the absolute DO NOTs? If you’re trying to partner with a bank, what are some things you should not do, not say, or not expect?
Doug: This may sound surprising in this day and age, but there are plenty of entrepreneurs that don’t want to fully disclose their business plan.
Angela: Why? They think you’re going to steal it?
Doug: They view it as proprietary.
Angela: But they want your money. [laughs]
Doug: [laughs] Right, they want the money so odds are good that for me, because I know technology companies and how they work, I’m going to need to know all the details. That may be a little unfair because I’m thinking back in the internet bubble days when there were a lot of companies who got funding from venture capital firms based on an idea from the web that really wasn’t monetized.
Angela: So, as you move along in the process of working with a client, what is usually the most surprising or difficult thing that comes up for them?
Doug: I had a company call me recently that needed a loan. I asked some questions about the basic business plan, and over the span of ten minutes, he was getting frustrated. He couldn’t answer my questions. It doesn’t matter how much money you need to borrow, any banker is going to ask the same seven points from the business plan we learn in college.
Angela: What are those seven points?
Doug: First of all, it’s the market you address. The second thing I like to see is if you study the market, what competition is already in place? That’s another thing people are afraid to disclose. They don’t want to disclose the competition because they think the recipient is going to say ‘Oh, Google can do it better than you’ (for example) but Google was a start up themselves.
Angela: Right. There’s room for everyone!
Doug: Yes, it’s ok to be a start-up. So, the plan, the competition, and then I need to know about the client. I ask for background, management, founder, etc. which ties into another point. Next, I would ask how you’re going to fund the vision. That is the hardest part for most clients, because they rarely sit and think over how they are going to finance their project. The vision and the market get solved but never the financing.
Angela: Yeah, I get a lot of questions about that. And that’s why I’m talking to you today.
Doug: Yeah, that’s the hardest part and probably most important. The last couple steps aren’t always necessary but at times we will need to discuss things like operating expense, scaling, etc. If you have that much, you’ve got it covered.
Angela: Great. So, why did you become a banker? Or should I call you a banker?
Doug: A frustrated actor.
Angela: That’s totally me!
Doug: Yes, an actor that never got his call and today is in banking to pay the bills.
Angela: We may have to edit this part out.
Doug: We probably should.
Angela: What do you want to be?
Doug: I’d rather be an actor or some sort of outdoor adventure guide.
Angela: Well, how do those passions come into play here? How do they make you a better banker?
Doug: That’s a very good question. I guess in a way, I act when I meet with a company that I know is a challenge in order to get them to understand what Wells Fargo does in technology.
Angela: What gets your motor running at work?
Doug: Good question. I think what drives me is the challenge and yet the opportunity at Wells Fargo. It’s a great institution, and yet there are so many resources to bring to bear for technology. It’s just scratching the surface. When I started Silicon Valley Bank in Austin fifteen years ago, I had a similar challenge. There were no technology banks in Austin at that time, and it was fun to start it. So now, in a way, I’m doing it again at a much larger institution with more resources. Wells is a great place. It is Warren Buffet’s bank. Did you know one in three people in America have their mortgage with Wells?
Angela: I have two!
Doug: Really? [laughs] Sometimes I’ll meet with technology companies and they’re a little perplexed. They ask, ‘Technology, really? There’s a stagecoach on your business card.’” [laughs]
Angela: [laughs] Well, you can’t get rid of that.
Doug: Right. The history of the bank is great. What many people don’t know about this part of the country, in Texas, is that the technology group for Wells has been going strong for fifteen years in Northern California. It’s really good out there, so I’m bringing it here. I have a little headwind from California to bring it here.
Angela: That’s good. Ok, so last question. Give me your last bit of advice, your two-minute elevator pitch, to companies looking to team with a banker.
Doug: To sum it up, if they’re passionate about what they believe and are genuine, that’s going to matter the most to Wells. Many people don’t know that we have a requirement at Wells. Before anyone banks with us, we will research their background before considering a professional relationship with them.
Angela: Really? Who knew? [laughs]
Doug: [laughs] We want to know you’re a good person. In the end, once we establish that relationship, we give that entrepreneur a lot of leeway to run their business. So, to get in is hard but once you’re in, you’re given a lot of room to run your business. We don’t micromanage situations. The Wells family is a good family to be in. I’ve been here three years now, and I’ve seen companies not meet their financial goals but we are right there with them. We’re hanging in there together. You want to choose a partner who will be with you in the good times and the bad. That’s what we do here at Wells Fargo.
Doug Mangum is the Regional Manager of the Technology Group at Wells Fargo Bank where he advises technology, life sciences and cleantech companies in creative debt structures to help entrepreneurs achieve their vision for success. Prior to Wells Fargo, Doug was the Managing Director for Silicon Valley Bank where he was instrumental in developing the Bank’s technology portfolio in Austin, San Antonio, and Houston. Doug currently serves as an Advisor and Board Member for community organizations and graduated with his Bachelor’s in Business Administration from Texas Tech University.