An hour and three minutes before Silicon Valley Bank blocked all withdrawals, Pat Phelan pulled out the last money from his company. Phelan’s aesthetic medicine startup, Sisu Clinic, has kept the majority of its reserves with the California bank. When he saw whispers of his troubles spreading across the internet, he joined the digital bank which ultimately caused Silicon Valley Bank to collapse.
“I just messaged our CFO and said, ‘Get the money out’,” Phelan said, adding that he had to wait overnight for the funds to arrive in his Bank of Ireland account. “It was an incredibly disturbing 26 hours.”
After a tense weekend, regulators in the UNITED KINGDOM And WE stepped in to protect depositors, averting the most dramatic potential consequences of the largest U.S. bank failure since the 2008 financial crisis.
But many players in Europe’s tech industry are warning of a slower-burning crisis ahead. If Silicon Valley Bank was so popular, it was because it filled a role that no one else would fill. It was a bank, a networking community and a venture capital firm all rolled into one. In some countries, it was a major investor. In Ireland, the bank had planned to invest more than $500 million in tech and life science startups by 2024. In the Netherlands, the bank has in discussions about how to fund more local businesses. Europe’s tech sector was already struggling with funding shortfalls, mounting losses and widespread job cuts. The loss of Silicon Valley Bank only adds to the gloom.
“What has happened over the past few days is once again there has been a recognition that, especially when it comes to bigger [investment] rounds…there aren’t many real big funds that can play a major role,” says Rinke Zonneveld, CEO of Invest NL, a government-backed investment company in the Netherlands. “We depend on American money.”
Silicon Valley Bank was integrated into the European technology sector through a series of affiliated companies and offices. His Danish office, which did not have a banking license, focused on networking. The German branch doesn’t offer a business deposit. But at the heart of this system was the bank’s London-based subsidiary, created in 2012, which has helped startups across the EU with funding, loans and accounts. On Friday, the Bank of England said Silicon Valley Bank was on the verge of bankruptcy, before that branch of the business was acquired in a last-minute £1 bailout deal by HSBC bank.
But many Silicon Valley Bank customers turned to the bank precisely because they felt traditional lenders were not configured to meet the needs of the tech industry specific requests.