Sam Odio expected a few congratulatory e-mails when he sold Divvyshot, his online photo-sharing service, to Facebook last April for millions of dollars.
Instead, his in-box was flooded with pitches from Goldman Sachs, Morgan Stanley and other Wall Street firms looking to manage his newfound wealth. Goldman has the inside track, having courted him with an exclusive factory tour of Tesla, the electric sports-car maker, and tickets to a screening of the final Harry Potter film.
?They sure know the way to a geek?s heart,? said Odio, 27.
Wall Street, as always, is going where the money is ? and right now that is Silicon Valley. The latest internet boom means there are more newly minted millionaires, and even billionaires, than at any time since the technology bubble a decade ago.
Many are brilliant young entrepreneurs and computer engineers. But for all their knowledge, the technology executives, many of whom are fresh out of college, are relatively clueless when it comes to estate planning. ?Betting the ranch on building a widget for the Facebook platform is very different than managing a long-term nest egg,? said Jay Backstrand, a vice president at JPMorgan Chase?s private bank.
Wall Street is more than happy to help ? for a fee. Banks charge roughly 1% for overseeing a wealthy investor?s portfolio. Though that may not sound like a lot, it adds up when billions of dollars are involved.
Financial firms are salivating over the wealth being created. Facebook is readying an initial public offering that will most likely value it near $100 billion. Employees and directors at Zynga own more than a third of the online game company, which went public in December at $7 billion. The list of prospects is long: Groupon is worth $12.2 billion; LinkedIn, $6.8 billion; and Pandora, $1.9 billion. Banks are casting a wide net for potential clients. At Facebook, Wall Street brokers are wooing executives, rank-and-file employees and administrative staff members. Morgan Stanley has a dual strategy, with one team of advisers responsible for senior executives at large technology start-ups and another for lower-level employees. Chris Dupuy, who leads Merrill Lynch?s wealth management team in the Pacific Northwest, recruits from the C-Suite to the ?corporate cafeteria?.
?Someone?s going to capture this wealth,? said Derek Fowler, a wealth adviser at Morgan Stanley. ?We just want to make sure we?re out there.?
Banks are aggressively expanding in Northern California, even as they retrench globally. JPMorgan opened a 10,000-square-foot office in Palo Alto, a hub of venture capital activity. Goldman, which is eliminating some 1,000 jobs worldwide, plans to increase staff in San Francisco by 30% over the next year. UBS has more than doubled its wealth management staff in the area since 2008. ?It?s very competitive,? said Joseph A Camarda, who relocated from Philadelphia to lead Goldman?s wealth management group in San Francisco. ?I think every firm has an A-list team out here.?
This feeding frenzy is familiar to those who experienced the last internet boom. In the late 1990s, Wall Street descended on Silicon Valley, luring clients from marquee names like Yahoo and eBay. But after scouting clients from start-ups that flopped when the bubble burst in 2000, some banks pulled back.
This time, banks seem more aggressive. Google, Facebook and other internet giants are snapping up start-ups to spur growth, turning founders into overnight millionaires.