Mark Calvey

San Francisco Business Times
February 14, 2003

Seven Hills Group LLC is joining the growing cadre of up-and-coming investment banks that hope to serve the emerging growth companies that were once the domain of Montgomery Securities and Robertson Stephens.

The San Francisco investment bank offers merger advisory services and private placement of debt and equity securities for companies with less than $500 million in so-called "enterprise value." In other words, the firm is targeting companies that are often too small to be of interest to Wall Street's big banks.

"Our firm fills a void created by the disappearance of the investment banks that historically served these companies," said Cabot Brown, one of the firm's three founding partners.

Seven Hills was founded in 2001 and operated for much of that time in stealth mode. This month the firm is raising the curtain, having brought on board Edward Leonard and Robert Valdez as partners and Richard Innenberg as a principal in the private placements group.

Leonard was a managing director at Broadview International; Valdez founded SG Cowen's mergers and acquisitions practice before becoming chief financial officer of San Francisco-based Yipes Communications; Innenberg was a principal and co-head of the private capital markets group at Robertson Stephens.

The firm, which employs 19, will expand soon into asset management services as well.

Seven Hills is avoiding areas of the capital markets business where the large brokerage houses, or so-called bulge-bracket firms, have an advantage based on their size and economies of scale. As a result, the firm doesn't underwrite public offerings or operate its own research department.

Seven Hills, named for the seven hills of San Francisco, is backed by an investor group led by Swiss Re Capital Partners.

The firm's three founding partners — Brown, Eric Edmondson and William Wisialowski — have known each other for years.

Brown has worked at Volpe Welty & Co.; Edmondson was co-head of the technology group for ING Barings; and Wisialowski was managing director and co-head of Robertson Stephens' M&A department.

Seven Hills joins San Francisco's other young investment banks — such as Thomas Weisel Partners and Pacific Growth Equities — that are vying to be the next generation of firms serving emerging-growth companies.

Those starting investment banks say that their nimble size and proximity to Silicon Valley gives them an advantage over larger rivals based back East. That strategy was pioneered by Montgomery Securities and Hambrecht & Quist more than 20 years ago — before they, too, became larger firms headquartered on the East Coast. Montgomery is now part of Banc of America Securities and H&Q was swallowed up by J.P. Morgan.

And Seven Hills isn't alone in staffing up. Pacific Growth has been steadily hiring over the past year or so and CEO Richard Osgood said the firm may soon add bankers.

But in one sign of the tumultuous nature of Bay Area finance: Seven Hills moved last summer to its offices at 88 Kearny St. that once housed operations of Thomas Weisel Partners. And prior to that, Charles Schwab Corp.

Mark Calvey covers banking and finance for the San Francisco Business Times.