(Bloomberg) — Venture firm General Catalyst has hired 20 former staffers from First Republic Bank, one of the casualties of the 2023 regional banking crisis, to create a wealth-management business.
Dave Breslin, formerly head of First Republic’s private-wealth unit, runs the new firm, which is being launched as GC Wealth. The company has steadily built up a base of existing high-net-worth clients brought over from the bank as well as a cohort of emerging tech wealth, including some executives that General Catalyst backs, Breslin said.
The San Francisco-based firm, initially called Catalytic Wealth when it was formed in September 2023, currently has more than 250 families as clients and more than $2.3 billion in assets under management, along with another $3 billion in potential liquidity, Breslin said.
“No one has evolved their wealth management, and I’m going back 20-odd years now, to judiciously steward early stage emerging-wealth people into a position of financial soundness,” Breslin, 45, said in an interview at General Catalyst’s headquarters.
First Republic — and to an even greater degree Silicon Valley Bank — were among the firms catering to the Bay Area’s venture capital and startup communities, offering loans to fledgling companies while attracting deposits from founders. Both lenders failed in 2023 as rising interest rates and a slowdown in tech stocks carved a hole in their balance sheets and customers yanked their money.
Read More: First Republic’s Jumbo Mortgages Brought On Bank’s Failure
Partially filling that void are venture firms including Sequoia Heritage and Andreessen Horowitz, which have been expanding their wealth offerings in an effort to tap into high-net-worth clients and deepen existing relationships.
Read More: Sequoia Heritage Eyes Credit, Real Estate Ahead of VC Split
Breslin said his goal is to replicate First Republic’s approach of being a do-it-all wealth manager, with an eye to the next generation of startup founders. GC Wealth’s ties to General Catalyst means that its clients will have opportunities to invest in the venture firms’ funds, and down the road, could see access to some deals.
The process also works in reverse. GC Wealth has already introduced more than 40 founders to General Catalyst, which has invested in several, Breslin said. Along the way, both firms hope they can benefit from better technology, whether it’s seeding new companies or helping vet fintech deals.
‘Woefully Inadequate’
“Our industry’s technology is horrible,” Breslin said. “It is just woefully inadequate when you compare it against the sophistication of the clients.”
Breslin joined First Republic in 2016 after 15 years at Merrill Lynch, and grew the San Francisco-based bank’s wealth business to $290 billion in assets from $60 billion. He first started talking to General Catalyst in the summer of 2022, before the banking meltdown.
Breslin said he originally thought the venture firm was interested in investing in a boutique wealth-management business, but quickly realized that they were serious about building something internally. His first day in the new job ended up being May 1, 2023 — the day JPMorgan Chase & Co. stepped in and acquired First Republic after it was seized by regulators.
Read More: JPMorgan Ends First Republic’s Turmoil After FDIC Seizure
The rescue may have created an opening for General Catalyst, but it wasn’t as easy as grabbing employees walking out the door. In fact, it made it harder, Breslin said, because both advisers and clients just wanted to be in a safe place for a while.
“They saw JPMorgan as a haven,” he said.
Still, Breslin was able to convince 19 of his former First Republic colleagues — from head of financial planning Michael Kato to Jackson, Wyoming, wealth manager Shelter Wein — to make the leap. Advisers in Boston and Bellevue, Washington, were also among those who came on board.
Clients also needed convincing. Maria Martinez, 67, the former Cisco Systems Inc. chief operating officer, had spent more than a decade working with her First Republic wealth manager, Nichole Heidrick, and was initially hesitant to make the move along with her.
“I was not comfortable to be honest, but the transition was perfect,” Martinez said. “But then what I appreciated is that it gave them more flexibility to work with more institutions. They’re not attached to a bank anymore, and that’s already brought us different opportunities.”
No Time
With the rapid growth of the tech industry, founders and employees are finding themselves coming into money sooner, but have to make a choice on what to do with it.
Early-stage founders “don’t have the time to figure out what the next steps in their journey financially are, nor should they because they have to be heads-down focused on their business,” Breslin said. “We’re doing planning for over 60 people right now who aren’t even clients.”
Those who end up working with GC Wealth will have some options to tap into the broader venture firm’s network. So far its clients have had access to the General Catalyst XII fund it raised last year, and Breslin thinks they’ll offer two to four private placements a year in startups.
Betting on emerging wealth could be risky. A high percentage of startups fail, and even GC Wealth’s attempts to re-make the industry from a tech perspective may not work. The AI boom has created massive fortunes in San Francisco, on paper, and the firm’s clients have potential for another $3 billion in liquidity, which could be wiped away if there’s another tech downturn.
For Breslin, that’s when playing the long term inside a venture firm helps. While every emerging investor or company isn’t going to be successful, they may eventually move on to another company that has better results, Breslin said.
“This network is so intricately tied that you’re not just betting on them individually, but you are betting on the fact that these people are going to do amazing things in life,” he said.