Imperial Bank's Daniel Styles showed up at the small offices of Xdrive about one year ago to get the scoop on the brand new company based in Santa Monica. Xdrive, which offers businesses and individuals a virtual hard drive for storing files online, needed $200,000 to buy heavy-duty Web servers. Its executives were hoping that Imperial Bank would extend them a loan. Styles, the executive vice president who heads up Imperial Bank's emerging growth division in Los Angeles, was curious about the infant company. Styles' job is to look at new technology companies that need loans or lines of credit. Imperial Bank extends loans at 1 percent above the prime rate. But tech companies won't get any Imperial Bank money until venture capitalists get involved. "We look at companies very much like the venture capitalists do. We look at the management team, the space (line of business) they are in and which venture capitalists are involved," the banker said. "We look at the due diligence and our track records with the VC firms involved in the new technology companies. Most of the companies we lend to are pre-profit and many are pre-revenue. So we need to look at it like a venture capitalist would." As part of its payment for extending loans or lines of credit, Imperial requires that it receive warrants valued at 5 percent to 10 percent of the loan amount. That means Imperial Bank gets a certain amount of shares in the company that the bank usually can't exercise until the new company goes public, is acquired or merges with another entity. Styles said Imperial Bank has been doing this kind of financing for about 10 years. With that in mind, Styles wanted to see Xdrive's business plan and get a sense of where the new venture was headed. So Styles sat down with company founder Brett O'Brien and Josh Berman, the senior vice president of corporate development, and talked about Xdrive's goals and future. The Imperial Bank executive was impressed. "We hit it off," Styles said. "The relationship started to cement, and we talked about what we could offer them." That was in late September 1999, right after Xdrive launched its site from a small office on Stewart Street where about 30 people worked. A few weeks later, Styles and his colleague Dan Bassett of the bank's leasing group had lunch with the Xdrive executives, sitting at the MTV cafeteria in Santa Monica. Again, Styles liked what he heard and saw. "I remember sitting in a booth and talking about their vision and about what we could do with them," he recalled. "We talked about what kinds of venture capitalists they were looking for and maybe how we could help them find some VCs. We try to stay close to the venture capital firms." With advice from Imperial Bank, O'Brien and his crew began talking to several venture capitalists, which proved successful. In October 1999, Xdrive got its first round of funding $3 million from David Bohnett, the founder of GeoCities, and Paul Orfalea, the founder of Kinko's (who took out his checkbook and wrote a check for $1.5 million). That first round of financing gave Styles a sense of confidence in the company's future. He was even more impressed in November when Xdrive got a second round of financing for $17 million from Goldman Sachs Group Inc., eCompanies Venture Group, Davis Cos. (run by oil and real estate mogul Marvin Davis), Deutsche Banc Alex. Brown and Wit SoundView Ventures. As the second round of venture capital financing materialized, Styles extended an initial $200,000 line of credit for equipment leasing. "We kicked off a small line of credit around the fact that they had some individuals and strong institutions beginning to look at the deal," Styles said. "We later expanded our lease line and our capital working situation." When Xdrive needed a quick line of credit to grab a hotly sought-after lease for a new office space, Styles stepped forward and threw together a line of credit in a matter of days. Unfortunately another company got the office lease. Meanwhile, Styles kept tabs on the tech company and its popularity among consumers and businesses. As he saw the company move up the ranks of popular Web sites, he didn't hesitate to extend a multimillion-dollar line of credit to Xdrive this spring, to help facilitate the company's move to a bigger office space in the popular Water Garden office complex in Santa Monica. "Brett told us at the beginning that he didn't want to be No. 2. He wanted to be No. 1, which I liked," Styles recalled. "That is why we have continued to increase our exposure." Since the initial meeting between the two parties, Imperial Bank has loaned the tech company between $5 million and $10 million.
In May, Xdrive received a third round of venture capital for $45 million.
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