How CIBC is growing business funding and advisory services

In the race to compete for small business clients, particularly tech startups, CIBC is putting its ears to the ground by acquiring a company that funds and advises them. CIBC recently acquired Wellington Financial, an 18-year-old Wellington provides term loans -- typically between $2 million and $40 million typically -- to tech companies and advises them on growth strategy. CIBC plans to fold it into a new unit called CIBC Innovation Banking, which will bank North American technology companies from offices in Toronto, New York and Menlo Park. Terms of the deal were not disclosed. "Banks across North America are always sizing up new technologies whether it's software, blockchain or how to improve their business in the interest of the customers; our role is to help finance promising growth companies," said Wellington Financial chief executive Mark McQueen, who will become president and executive managing director of CIBC Innovation Banking. The companies it will fund and advise run the gamut of tech areas, including finance and clean technology, and the objective is to support innovation, even if they aren't immediately profitable. One follow-on effects will be identify companies for future partnerships or acquisitions, the bank said. It's also offering them cash management, deposit products, wealth and capital markets services. "It's a point of differentiation; it's a move to becoming a consulting and advisory service," said Christine Barry, research director at Aite Group, said of CIBC. "Business customers are becoming more sophisticated, and banks want to get them through the door and grow with them -- hopefully this will mean more revenue." CIBC was planning its expansion of small business offerings long before the Innovation Banking launch; as it grows its business advisory team and it plans to launch a digital banking platform for business combining banking, payroll, merchant services and accounting all in one place. Innovation Banking also plans to open a Chicago branch through CIBC's June acquisition of PrivateBancorp, McQueen said. "While several banks have either newly or already well established venturing businesses that make principal investments in new startups, we see many more banks focusing on rethinking the nodes through which they can partner, collaborate and engage fintechs more meaningfully," said Nikhil Lele, a principal at EY Financial Services. CIBC isn't alone among banks that want to go after business customers, with Bank of America and Wells Fargo rolling out specialized tools for them. Innovation Banking is a new way of reaching early-stage startups, a means to keep up and set itself apart from competitors. Instead of creating an innovation lab like many other banks -- like Barclays, JPMorgan Chase, and BNP Paribas -- have done, the bank acquired a company that performs a lot of the same functions. The acquisition is the third in recent months. Two weeks ago, TD Bank acquired Layer 6, an artificial intelligence company, whose niche is in personalization and prediction, and in October JPMorgan Chase recently acquired the electronic payments company WePay.