The collapse of Silicon Valley Bank has sent shockwaves through the global start-up community and beyond, but HSBC‘s takeover of the bank’s UK arm may prove a positive development for UK scale-ups in the midst of so much panic.
Until its collapse, Silicon Valley Bank serviced around half of all the Bay Area’s venture-backed start-ups and the majority of the region’s venture capitalist (VC) firms. Silicon Valley VCs have tentacles across the global start-up community. The UK start-up community, in particular, has uniquely strong ties with US venture funding leaving UK companies vulnerable in the wake of the bank’s collapse.
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UK prime minister, Rishi Sunak’s announcement today (13th March, 2023) that London-headquartered HSBC is to take over the UK arm of Silicon Valley Bank, was received with much relief says Gerard Grech, CEO of Tech Nation, a government-backed organisation serving the UK scale-up tech ecosystem. UK Silicon Valley Bank customers will be able to access their deposits and banking services as normal. “Protecting UK deposits will help smooth the transition for many. It protects a generation of high-growth and high-impact companies,” says Grech adding that: “I do believe that such situations make the ecosystem even more resilient.”
GlobalData fintech thematic analyst Stephen Walker echoes this sentiment and views the fallout from the bank’s failure as more multilayered than simply a start-up crisis, affecting both small and scaling tech businesses.
HSBC’s takeover of Silicon Valley Bank’s UK arm is an important win financially and ideologically for the the bank, says Walker, describing the move as a big safe incumbent bank coming to rescue of the UK tech sector. HSBC’s takeover also sends a clear message to the scale-up segment of SMEs, which Walker says is under attack in the UK from new entrants like Allica.
“While tech scale-ups in UK are a far larger and more profitable segment than micro SMEs, they often fall through cracks in terms dedicated bank support, that’s not an ideological point, just a structural one,” he says.
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By GlobalData“Medium-size tech start-ups that chose to bank with Silicon Valley Bank and not a high street incumbent bank, will now view HSBC as strong, stable and saving the day, in light of Silicon Valley Bank’s failure,” adds Walker. And in the process of serving those customers, HSBC will likely improve its ability to retain and acquire SME customers with a similar profile, Walker points out.
