Britain’s Startups And Investors Ponder HSBC’s Acquisition Of Silicon Valley Bank’s U.K. Arm

It all happened very quickly. After a frenzied weekend involving the government and the financial sector, a buyer has been found for the UK arm of Silicon Valley Bank. Naturally, there were sighs of relief everywhere. Businesses that feared being denied access to their deposits could breathe again.Key players in the UK banking industry rush to the rescue twice as fast

But for the startup community, there is still a lot to unravel.

The fact that Silicon Valley Bank UK has over 3,000 customers demonstrates its importance to the UK’s technology and life sciences ecosystem. These are probably the companies that you can choose to bank with big names in this sector. Instead, we chose SVB because we see it as a bank that understands the special requirements of startups and scale-ups.

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data management, visualization and discovery company, solidarity is a good example. “The company raised his Series A funding in 2020 to scale and accelerate our global expansion,” said CEO and founder Phil Dutton. SVB came highly recommended, which is why he chose SVB as his leading UK and US banking provider. “

This is a point that Richard Anton, General Partner of European Software Business Investor, agreed. Ox VC. “When SVB was founded, no other commercial bank focused on this ecosystem. We provided value-added services, which are still valuable and we strongly support SVB to return to the ecosystem again, normal operation, ”he said.

The bank’s popularity with start-ups meant that in a counterfactual world where it wasn’t bought by HSBC for £1, there were genuine concerns about its negative impact on the UK’s innovation economy.

“The impact was short-term and severe,” adds Anton. “We have seen many businesses struggle and often fail as their cash evaporates. Within a week or two, companies would have needed to find emergency funds to survive.Even in the best of times, this is difficult to do at scale, and the current financial situation puts many companies out of business. They would go bankrupt.”

VC co-founder and managing partner Stephen Chandler said: Capita conceptAgree. “The main problem has been the huge bankruptcy risk for businesses with their cash deposits frozen or lost at banks. .”

This has had the knock-on effect of making the asset class less attractive, he adds. “In the longer term, the innovation ecosystem will be set back for years, impacting the UK and global economy in terms of jobs, skills, growth and tax revenue,” he says.

All’s Well That Ends Well?

At this point, it’s tempting to conclude with the words “all’s well that ends well”. But there are some questions to ask. From the outside, the UK government and banking authorities were working very effectively and, more importantly, the major institutions were ready to take on startup-minded banks.

But maybe something has changed. Hristo Borisov is his CEO and co-founder of an expense management company. PayhawkHe said the start-up will try to de-risk banks. “Startups will ‘evolve’ the way they interact with money. Most tech companies today may add other bank accounts, credit cards, etc. to their financial stack. It also diversifies suppliers, vendors and critical business his infrastructure to reduce over-reliance on any particular provider. “

Richard Anton says there are lessons to be learned. “The past shows that we all have a lot to learn, and everyone at the company, corporate and regulator level needs to digest where it all ended up,” he said. says.

So what can policymakers consider? Anton raises a few questions. “Should steps be taken to diversify banking service providers? Should banks implement more risk protocols?”

There is perhaps some question as to whether governments can do more to insure deposits for startups if banks file for bankruptcy.

said Mike Rhodes, Founder and CEO of ConsultMyAppMr p, who responded to my email asking for opinions, said startups might look for banks closer to home. “British start-ups and scale-ups are beginning to realize that Silicon Valley is not the only avenue for banking and investment. We also have HSBC with its global headquarters, which now gives us a key entry point into the lucrative technology industry.”

Of course, it highlights the role of HSBC. We are very pleased with the acquisition, which will enable us to provide banking services to some of the UK’s most innovative companies. It’s a powerful position.

The industry is eager to see how banks will operate their new acquisitions.

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