The collapse of Silicon Valley Bank has sent shockwaves through the global start-up community and beyond.
The bank serviced around half of all the Bay Area’s venture-backed start-ups and the majority of the region’s venture-capitalist firms.
However, HSBC’s takeover of Silicon Valley Bank’s UK arm may prove a positive development for UK scale-ups in the midst of so much panic.
The Fallout of Silicon Valley Bank’s Failure
The fallout from the bank’s failure is more multilayered than simply a start-up crisis, affecting both small and scaling tech businesses.
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.
Stephen Walker, GlobalData fintech thematic analyst, notes that the collapse has a structural impact on the market.
HSBC’s Takeover: A Positive Development
On 13th March 2023, UK Prime Minister Rishi Sunak announced that HSBC would take over the UK arm of Silicon Valley Bank.
This news was received with much relief by the UK scale-up tech ecosystem.
“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,” says Walker. And in the process of serving those customers, HSBC taking over in a crisis sends a message to other medium size tech businesses that HSBC may be a good bank for them, while at the same time refining what HSBC offers to that segment, he adds.
Protecting UK Deposits and Smoothing the Transition
The UK Silicon Valley Bank customers will be able to access their deposits and banking services as normal, and this protects a generation of high-growth and high-impact companies.
Gerard Grech, CEO of Tech Nation, a government-backed organisation serving the UK scale-up tech ecosystem, notes that “protecting UK deposits will help smooth the transition for many.” He also adds that “such situations make the ecosystem even more resilient.”
The Bottom Line
The collapse of Silicon Valley Bank was a shock to the global start-up community, but the takeover of the bank’s UK arm by HSBC may prove to be a positive development for UK scale-ups.
The move sends a clear message to medium-sized tech businesses that HSBC may be a good bank for them while also refining what HSBC offers to that segment.
The UK Silicon Valley Bank customers will be able to access their deposits and banking services as normal, which will help smooth the transition for many.