As the news of the Silicon Valley Bank collapse rippled through the start-up sector, many businesses were left feeling uncertain about their future.
Whilst news of HSBC’s buyout has provided some relief for companies in the UK, events continue to unfold in the US, with economies all over the globe feeling the shockwaves.
We asked a panel of experts to comment on what the impact of this historical event could be:
Our Panel of Experts
- Nigel Green, Founder and CEO at deVere Group
- Dr. Ilia Kolochenko, Founder at ImmuniWeb
- Charlie Graham-Brown, Partner at Seedstars International Ventures
- Charles Fletcher, Partner at Mishcon de Reya
- Yiannis Maos, Founder at Birmingham Tech
- Su Carpenter, Director of Operations at CryptoUK
- Angel Maldonando, Founder & CEO at Empathy.co
- Ifty Nasir, CEO and Founder at Vestd
- Miles Kirby, CEO at Deeptech Labs
- Anthony Turner, Corporate Partner at Farrer & Co
Nigel Green, Founder and CEO at deVere Group
“The Federal Reserve, the US Treasury and regulators were forced into taking action in order to break the doom loop hitting the banking sector. A failure to act would have to be a dereliction of duty.
“If they hadn’t given customers access to their all deposits from Monday, it would have resulted in a loss of confidence in the banking system, leading to a ‘run on the banks’ which, in turn, would have caused a liquidity crisis in the broader financial system, potentially triggering a full-blown global financial crisis.
“It also brings into question the Trump-era deregulation of banks which reduced both oversight and capital requirements, seems to have contributed to SVB’s collapse. Now there needs to be a serious conversation about reversing the law to shore-up confidence and to avoid further collapses.
“Another key takeaway is that it’s now doubtful that the Fed will continue with its plan for aggressive interest rate hikes. The next hike was widely expected on March 22 following robust jobs data in January and February.”
Dr. Ilia Kolochenko, Founder at ImmuniWeb
“The sudden downfall of Silicon Valley Bank provides unmissable opportunities for cybercriminals. We should expect a surge of sophisticated spear-phishing campaigns, imitating governmental notifications on rescuing SVB funds or third-party offering facilitated access to loans, targeting countless startups and tech companies affected by the sudden collapse.
“Emotionally exhausted and desperate victims will likely be much less prudent and may become a low-hanging fruit for perfidious cyber gangs.
“Worse, with tools such as ChatGPT, even unskilled cybercriminals can generate high-quality phishing emails, asking for sensitive financial or personal data. More sophisticated criminals may even rent “clean” US phone lines and offer by email to call a “loan officer” to get a credit in one business day, catching psychologically vulnerable victims off guard after talking to the fake loan officer – who may be fluent in English and otherwise trustworthy. Most people will then blindly trust any further communications by email.
“Sadly, victims of such incidents will unlikely get any coverage by cybersecurity insurance. Therefore, anyone who receives an email in relation to the SVB rescue, loan or credit must carefully scrutinize its content and authenticity before replying or clicking on any links. Likewise, double-check who is calling or texting you, as if the offer is too good to be true, it is very likely indeed too good to be true.”
Charlie Graham-Brown, Partner at Seedstars International Ventures
“The US Government’s support to SVB depositors has likely averted any contagion that we feared last week. The bank failure has highlighted the concentration risk apparent in the global VC industry and is a stark reminder that the first principle of diversification should not be forgotten.
“The more positive outcome of the recent days has been the strong support and solidarity demonstrated by all stakeholders with various webinars, resource libraries, and analysis rapidly circulating.”
Charles Fletcher, Partner at Mishcon de Reya
“The collapse of Silicon Valley Bank – and subsequent rescue of the UK arm by HSBC – has important lessons for any start-up.
“Emerging tech companies are vital for the nation’s continued economic prosperity. We work with businesses from across the emerging company and venture capital community. In our experience, there are simple, practical steps to financial management that businesses can take to minimise the uncertainty and stress many have experienced over the weekend.
“Key actions include keeping corporate accounts with more than one bank, having an emergency funding plan to avoid cashflow squeezes, separating funds from different sources and taking a strategic approach to managing currencies. These should accompany fundamental business planning and management steps, such as a detailed risk register and crisis management protocols.”
Yiannis Maos, Founder at Birmingham Tech
“The sale of SVB UK to HSBC should be seen as a positive but also as a big opportunity for the tech sector. Tech businesses will now have access to the same SVB features that they’ve always valued but now at a bank with a global footprint and connections. This should enable tech businesses with ambitions to ‘go global’ the opportunity to access valuable resources. HSBC also brings with it additional tech capabilities, most notably its £250 million fund to support high-growth tech businesses.
“A slight word of caution should be mentioned in regard to HSBC’s purchase of SVB UK and Barclays winning the government contract to support the tech sector (replacing Tech Nation), there’s now a danger that the big banks have too much control over a sector that needs to be dynamic, innovative and agile.”
Su Carpenter, Director of Operations at CryptoUK
“The news that Silicon Valley Bank UK customers can access their deposits and banking services as usual from today is a huge relief for the crypto and technology sectors.
“We also welcome Prime Minister Rishi Sunak’s reaffirmation of his commitment to financial innovation, highlighting its critical role in the UK’s economic future, in the announcement of the HSBC deal and in advance of Wednesday’s budget.
“However, the events of the last few days have highlighted a topic which CryptoUK continues to raise with government and regulators – the desperate need for better access to banking relationships for crypto businesses.
“SVB had a lot of crypto businesses and fintech customers. The purchase of SVB UK by HSBC is an indication that they are accepting crypto businesses as viable customers and arguably recognising their potential – which is more than many UK banks have been willing to do to date.
“We welcome this and hope that we see an increase in the number of larger institutions willing to provide financial products, including lending and custody, to crypto businesses. This would help drive innovation, better protect consumers, and help crypto businesses de-risk by spreading funds across more providers.”
Angel Maldonando, Founder & CEO at Empathy.co
“The collapse of Silicon Valley Bank caps off a difficult twelve months for the tech industry. We’ve seen a period of post-pandemic readjustment for the sector, with significant redundancies and fall in valuations, with the combined value of Alphabet (Google), Amazon and Meta (Facebook), dropping by half only in the last eighteen months.
“This episode highlights the immaturity that still exists in tech, a bank collapse that was clearly avoidable. But this should also cause a deeper reflection amongst those in the sector. We have seen a level of hubris persist, with companies all too often unable to meet lofty valuations, bumped up on Venture Capital go-to-market strategies designed for reach rather than profit.
“It’s time for tech to finally focus on delivering authentic value, not mistaking the consistent development of new features and functionalities as a way to further monetise customers for innovation. There is a reckoning for businesses that persist with this mindset, it’s unsustainable as it will ultimately diminish the trust they have with end users and consumers. It’s time for a new way, where the sector looks for organic growth that is grounded in an ethical value exchange and trust between them and their customers.”
Ifty Nasir, CEO and Founder at Vestd
“The Silicon Valley Bank collapse has been yet another worry for startups and founders who are already struggling in a tough economic climate.
“While the HSBC rescue plan for the UK branch of the SVB offered some comfort to their 3,000 business customers it will of course have led to some founders worrying over funding and the security of their money.
“Raising funds is a fundamental part of a startup’s growth and success. But when you’re unsure of the stability of the market and whether you have an investor or bank you can trust, that entrepreneurial drive or innovation the sector so crucially depends on, can be threatened.
“Chancellor Jeremy Hunt said there was never any financial risk for UK businesses, but it is still a reminder of how fragile things can be for startups. Therefore, any added support he can offer for enterprise or small businesses with his budget announcement this week, the more assurance it will give to founders about future risk.”
Miles Kirby, CEO at Deeptech Labs
“For deeptech specifically, the deal marks a positive step in securing the immediate future of the UK’s early-stage life science and tech start-ups. With growing investment in European deeptech (€700 billion), the potential for European companies to rise up, attract more investment and generate higher returns has never been stronger.
“Following the government’s announcement last week to grow the science and tech industry outlined in the UK Science and Technology Framework, the speed of action reinforces its commitment and ambition to position the UK as a leading technology hub for investment and innovation.”
Anthony Turner, Corporate Partner at Farrer & Co
“The response of the Government and regulators to the acquisition of the UK arm of Silicon Valley Bank by HSBC for £1 sends a very clear message to entrepreneurs and investors of the importance of the wider tech industry to the UK. The UK Government has shown that it will proactively step in and take action to support the sector when needed.
“The issues with SVB largely related to the bank’s own finances and how they were affected by interest rates, and not the business of its underlying tech clients. It was a banking issue and not a credit issue. As such, tech companies should not read too much into the underlying problems of SVB for their business.
“There are nonetheless important lessons for innovation companies; banks are likely to be more closely supervised and this may affect their approach to risk (which may affect the availability of, or ease of accessing, funding) and where possible tech companies should avoid exposure to a single bank.”