“I’m coming to the UK to help open our commercial banking activity in the UK. We’re should be up and running in Q3”. So said Oscar Jazdowski in March 2010. Elaborately mustachioed, impeccably dressed, uber networked and unfailingly charming, Oscar reckoned without the tiny process of getting FSA for the new venture and so for the past two years, the UK’s technology companies have had to wait while the fledgling venture navigates its way through Financial Services Authority regulation. (And that remember is with the significant support of the government – George Osborne is quoted in the press release announcement this morning.
And now the time has come. Silicon Valley Bank has opened its doors for commercial banking business. There is currently very little real choice for technology companies and entrepreneurial businesses in the UK. The high street banks are without exception incredibly bad at understanding the relatively specialist needs of high growth companies. They are generally structured and managed around revenue with businesses of less than £20million revenue all being lumped together as SMEs. The, ‘Computer says, ‘No!” attitude is the norm and for entrepreneurs, the frustration of meeting a bank manager whose principle objective is to try to sell the account holder a series of standard products is significant.
So how will Silicon Valley Bank be different? (As I understand it anyway)
- Understands growth: SVB focuses solely on technology customers and therefore understands that a company with £5,000 revenue in year one may actually be a great prospect for a bank if they have the right people behind them, the right investors or a market that is growing fast enough. They are likely to take entrepreneurs seriously.
- Seeds and builds useful ecosystem Banks, and other service providers, like to see themselves as ‘partners’ of the businesses that they work with. On a local banking level, this might mean that you as a customer get invited to a golf day to meet some of the other customers of the bank. In reality, this might mean a round of golf with a racehorse breeder, a local builder and a couple of farmers. All very pleasant if you are in to that sort of thing. How much more useful would that golf day be if all of the other people you met were running technology businesses or wanted to help you grow your business and happened to know people all round the world that could make it happen?
- International network As they are so well established in the US, they are likely to be able to make connections for the customers that other banks simply couldn’t. Does the manager of your current bank have access to the founders of Twitter for example?
So why won’t Silicon Valley Bank be right for every entrepreneur?
We think that a specialist technology bank operating in the UK is a great thing but it is also worth pointing out that it will not be right for every company.
The first thing to point out is that banks are not charities, they exist to make money, and SVB are likely to be as careful about who they lend money to, and on what terms, as other banks, even if they have a keener appreciation of the risks involved with lending money in the technology sector than their competitors. SVB have operated a core lending business in the UK for several years so this piece of their business – the provision of ‘venture debt’ alongside a select group of pre-approved venture investors, is not new. It will be interesting to see how their lending profile evolves but if they intend to lend ‘billions’, it is very unlikely to be in the form of a large number of small loans.
The second thing to point out is that banks are not charities – they are unlikely to be able to spend a lot of time speculatively with very early stage companies. They, like many organisations might wish that they could, but the reality is, they have to pay their overheads like any business and investing in early stage startups is hard.
Overall the news SVB are opening their commercial banking in the UK is great news for the best UK technology companies. They will not compete on price, they will likely compete on service and understanding of the sector. For that reason, those banking with SVB will become part of a pretty exclusive club. I can see a day, not far away, when banking at SVB will be a mark of cachet in the same way that having a Coutt’s cheque book was 20 years or so ago.
Here is an edited version of the SVB press release:
The Only Global Bank Dedicated to the Innovation Sector Will Provide Full UK Commercial Banking Services
LONDON and SANTA CLARA, Calif. — June 11, 2012 —Silicon Valley Bank, financial partner to the technology, life science, cleantech, private equity and venture capital industries, opened a full service commercial banking branch in London today to serve both local and international businesses. The first US bank to open a commercial banking branch in the UK in several years, Silicon Valley Bank is offering a full suite of products and services to innovation businesses in the UK, including current and deposit accounts, loans, cash management services, trade finance and foreign exchange.
Having banked some of the most successful and well-known technology brands in the world, including Cisco, Evernote, Mindspeed, Mozilla and Pinterest as well as some of the top investors in the sector including NEA, Sequoia Capital and Silver Lake, Silicon Valley Bank is a crucial part of the innovation ecosystem. For three decades in the US market, it has helped thousands of companies to be successful, from the earliest startups to large public companies. In the US, 50% of the venture capital-backed technology and life science companies work with Silicon Valley Bank.
Phil Cox, Head of UK, Israel and India for Silicon Valley Bank, added: “Silicon Valley Bank’s offering is unique in the UK. As a sector-focused organisation, we are highly specialised in our approach, fast-paced, and consider our deep expertise, dedication to the innovation space and unrivalled network of relationship contacts around the world to be clear differentiators. We have seen a marked shift in recent years in our chosen niche industries’ activity within the UK. The elements of an emerging and effective technology ecosystem are all around us: first class universities, an entrepreneurial and business ownership culture, investors, the emergence of technology clusters and the support for the sector within the UK government are all very positive indicators. Building on our credentials of supporting technology firms in the US, we are excited to be able to help the UK’s entrepreneurs meet and exceed their ambitious goals.”
Silicon Valley Bank has had a presence in the UK since 2004 through its affiliate SVB Financial Group UK Limited, providing access to financing solutions for some of the highest profile and fastest growing UK-based technology companies: The Foundry, Shazam, Icera, Mimecast and Adconion, for example. Top-tier venture firms such as Index Ventures and Balderton Capital have also chosen to work with Silicon Valley Bank in the UK.
Commenting on the launch, George Osborne, Chancellor of the Exchequer today said: “The news that Silicon Valley Bank is launching a full banking service in London is yet more proof that the UK is fast becoming the technology centre of Europe. The knowledge, expertise and dedication that Silicon Valley Bank brings to the ecosystem is another important step toward our objective to make the UK the best place to start and grow the great technology companies of the future.”
Visit www.svb.com/uk for more information.