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How Silicon Valley Bank’s collapse sparked concerns across the North’s tech sector


HSBC’s last minute £1 rescue deal of Silicon Valley Bank’s (SVB) UK arm is undoubtedly welcome news for many worried leaders following a weekend of upheaval across the UK’s tech sector.

But how did it all unravel for California-headquartered Silicon Valley Bank, which specialises in lending to technology companies, and why was there a major ripple effect on the tech community across the UK and in the North?

On Friday, Silicon Valley Bank collapsed and was shut down by US regulators after failing to raise enough money to plug its losses from the sale of assets affected by higher rates. It’s just a slice of the picture, as customers pulled deposits from the lender in their droves and SVB’s stocks tumbled.

Fears began to mount about the impact on the UK’s tech sector, with both start-ups and scale-up companies reliant on SVB through the lender’s UK arm based in London. With around 3,500 customers, SVB’s UK division reportedly provided banking services for 40% of the UK’s biotech sector.

Tech leaders took to social media to voice their concerns and offer advice, with many unable to access funds. It further propelled fears about the threat of SVB’s collapse to the UK tech sector, potentially thwarting the government’s plans for the UK to become a “science and tech superpower by 2030”.

It sparked a rapid movement within the tech community, with more than 200 tech leaders uniting in a bid to urge Chancellor Jeremy Hunt to consider government intervention in an open letter about many companies potentially becoming “technically insolvent”.

Dan Murray-Serter, founder of healthtech start-up Heights, said he woke up to the news that his company’s bank account had “gone under” on Friday.

Alongside dozens of tech leaders, on LinkedIn he detailed how he launched a WhatsApp group named ‘Save UK Tech’ to rally the tech community, working “tirelessly” to gather vital information to relay to the government.

Working “at pace” over the weekend ahead of potential chaos before trading resumed on Monday, the government and the Bank of England held crisis talks in a scramble to find a resolution. 

Shockwaves rumbled across the North’s tech community. Moving quickly on Monday to reassure investors, Manchester-headquartered ecommerce retail giant THG and Stockport’s musicMagpie released statements to the London Stock Exchange that there was “no exposure” or SVB’s closure would be “unlikely to have an impact”.

At the eleventh hour, HSBC saved the day as the government and the Bank of England worked to facilitate a private sale of Silicon Valley Bank UK. “Normal operations” will now resume at the UK arm of the bank, with deposits protected at no cost to the taxpayer.


Northern tech leaders react

Manchester-headquartered success story AppLearn was already on alert last Thursday when the SVB’s stocks began to plummet. SVB was one of several investors involved in the digital adoption firm’s significant financing last year.

“We always tend to have three scenarios. If a doomsday scenario were to happen, like a bank collapsing which is quite an extreme and rare one, we know what to do and when to do it. We try to have all of our risks spread as much as we possibly can,” Andrew Avanessian, CEO at AppLearn, told Prolific North.

“Although we raised a significant amount of money from SVB, we have that money spread across a number of different bank accounts in order to mitigate any scenarios that a bank was to collapse or split.

“Especially because SVB lent to tech businesses and early-stage tech businesses. You could argue they’re more vulnerable than the likes of Natwest or HSBC who tend to lend in a more traditional way. Whereas tech and scale-up businesses, they’re high risk.”

The board closely monitored the situation unfolding on both sides of the Atlantic, as around 60% of the company’s revenue comes from its US office in Boston.

“On Friday, we took steps to move some additional funds outside of SVB, to make sure that we’re in a safe position and we weren’t affected by it. Where we landed was a very limited exposure to it.”

Although he welcomed the “good news” about HSBC’s takeover, the UK division is in a “stronger position” than the US entity. He’s hopeful though, following an announcement by the Federal Deposit Insurance Corporation (FDIC), that all US firms will be able to access funds.

“It was always going to end in good news. When I sat with my fellow directors having a conversation about it, the likelihood of SVB being taken over and being backed by the UK government was extremely high. But what you can’t do is wait and see.” 

He had conversations with various tech companies across Manchester that had “a lot more exposure” to the situation than AppLearn did.

“They couldn’t get their funds out as quickly as we did. They were a bit more concerned until the HSBC news.”

Andrew Avanessian
Andrew Avanessian

For Harry Luscombe, co-founder of Manchester-based open banking start-up Boodil and former Commercial Director at Total Processing, it would have been a “very challenging weekend” for start-ups and investors across the Northern tech ecosystem who had significant exposure to SVB UK. 

“The Bank of England announced on Friday that the UK arm of SVB was to go into insolvency, with many tech companies in the UK having their accounts frozen. It was probably a deeply worrying weekend for those that were waiting in limbo,” he told Prolific North.

“When we first started out we tried to apply for an account with SVB however we were rejected. It was a bank that was highly recommended in the start-up and VC community. Because it has decades of experience, you’d feel confident in having your money sitting in an account with them. We are fortunate that we were rejected, or we would have been amongst those highly unfortunate companies that had to go through that ordeal of not knowing if they would be able to make payroll or even survive.

“Raising capital in the current market is difficult, however doing that if your account had been frozen would have been a really challenging thing to contend with not only from a business perspective but also from a mental health standpoint for these entrepreneurs, business owners and even VCs,” he said.

“Moving forward, I think businesses that have cash in a sole bank may re-evaluate whether having all of their money sat in one bank is a wise idea.”

But what’s next after the HSBC deal?

Alessandro Hatami, managing director of strategic consultancy Pacemakers, co-author of ‘Reinventing Banking and Finance’ and former director at Lloyds Bank, commented: “This is a good outcome for Northern tech and life sciences companies and for the sector as a whole. 

“HSBC is an excellent buyer that will not only support Silicon Valley Bank UK, it will also potentially help the rollout of SVB’s innovation friendly approach to EMEA. What’s more, HSBC’s much more prudent and professional risk management approach will ensure that there is no repeat of mistakes made by SVB’s senior team in the US in addressing the bank’s capital requirements.”

But for Wayne Scott, regulatory compliance lead at Manchester firm NCC Group Software Resilience, HSBC’s last minute rescue deal doesn’t mean the case is closed.

“The HSBC rescue is a great thing for the UK financial market and the tech companies who are customers of SVB, but that doesn’t mean the problem is solved,” he explained.

“We’ll feel the ramifications of SVBs failure for some time. We can’t always rely on public and private bailouts of failing banks. There is too much at risk, from the companies intimately linked to SVB to the wider networks borrowers are part of. One of the only ways to properly mitigate the impact of inevitable future crashes is proper regulation and due diligence globally.”

Ifty Nasir, CEO and founder of equity management platform Vestd who grew up in Yorkshire, said the crisis had just been “yet another worry for start-ups and founders already struggling in a tough economic climate”.

He said: “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 start-ups. 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.”

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