Like signs of spring, new buds on the branches of technology companies signal a recovery in that sector. And Bridge Bank of San Jose is positioning itself to cultivate those prospects through it's newly formed technology banking division.

"We expect it to be a significant portion of our business," says Dan Myers, the president and chief executive officer of Bridge. He hopes to grow the technology sector of the bank's portfolio to as much as one third or more of its business.

To do so, Bridge will be taking on the likes of Silicon Valley Bank of Santa Clara and Comerica Bank, a Detroit-based institution with a technology and life sciences division based in Palo Alto. That division also has offices in virtually every U.S. biotechnology hub.

Bridge hired Ed Lambert away from Comerica Bank where he was senior vice president of business development for the technology/life sciences division.

Comerica spokesman Barry Holtzclaw says Comerica and Silicon Valley Bank are the two major banks locally funding venture capital-backed technology companies.

"The primary competition for our tech division is Silicon Valley Bank," Mr. Holtzclaw says.

Comerica inherited that division when it purchased Imperial Bank in 2001.

Mr. Holtzclaw and industry analysts agree there has been a noticeable uptick in venture capital activity in the past couple of months. And that is a significant driver of technology.

Bridge Bank had intended to make technology a large part of its lending mix from its inception in May 2001. But then the bubble burst.

"We knew enough about the sector to sit on the side lines. We decided to stay with our core business of real estate, construction and SBA," Mr. Myers says.

But with improvement in the venture capital world and with the economy recovering, is seemed time to get back to the original game plan.

"Things have been getting progressively better," says Mark Heesen, president of the National Venture Capital Association in Arlington, Va., a nonprofit trade organization. Mergers and acquisitions have been strong, initial public offerings could be better but are "not horrible," and money is getting distributed back to investors, which hasn't happened in a while, he says.

Although the $5.3 billion in venture capital dollars raised in the first quarter of this year falls below the $6.2 billion for the fourth quarter of 2004, it is double the $2.67 billion raised in the first quarter of 2004.

"Things are percolating along, now the arrows are pointing in the right direction," Mr. Heesen says. "Hopefully we won't become silly again and go back to the bubble situation."

A tack that some banks take to fund start-up companies, and many technology companies fall in that category, is venture leasing. A bank may offer a company without much collateral or credit worthiness financing in exchange for a high interest rate and shares of the company.

"We've seen quite an increase in the number of these venture leasing funds in the last year," says Eric Sigler, a partner with BA Venture Partners based in Foster City. His company is funded by Bank of America, but is a standalone partnership.

Silicon Valley Bank has done quite a bit of this leasing and has been very successful at it, Mr. Sigler says.

Overall the lending guidelines for funding start-up technology companies have become more liberal both in terms of what the banks are securing and in the increased amount of capital companies are able to get, he says. And that is good news for venture-backed companies, he says.

Venture capitalists had for the past three years shifted their funding from brand new companies to maintaining the more mature ones in their portfolios, Mr. Myers says. "It seems to be shifting back to creating new companies," he says.

And when the venture community is funding more start-ups, that makes more customers for banks.

Bridge also recently formed an international banking group division and has hired Jeannie Kao who was previously senior vice president and manager of international credit products in the international division of Silicon Valley Bank. That new division should fit well with the new technology finance division.

Mr. Lambert says he's seeing an increasing influx of companies coming here from all over the world. He recently went to a function in Finland which 300 companies attended and almost all of them were considering a presence in Silicon Valley.

"Three hundred companies were considering if it were time to come here and play in our sand box," Mr. Lambert says. "This is the place you come to prove you are the best."

And Bridge will be angling for a lot of that banking business.

Lynn Graebner covers nonprofits and life sciences for the Business Journal. Reach her at (408) 299-1822.

(c) 2005 American City Business Journals Inc.