Silicon Valley Bank’s struggles began with a nasty guess on long-dated US bonds. Rising rates of interest meant that the worth of these bonds fell. As depositors began to fret in regards to the financial institution’s stability sheet, they pulled their cash out. High rates of interest have change into a problem throughout the business, ending the cheap loans  that tech firms received used to over the previous decade and lowering obtainable funding.

More than $400 billion in worth was wiped from Europe’s tech business in 2022, whereas some firms, just like the buy-now, pay-later supplier Klarna, watched their valuation plunge greater than 85 percent. This yr there’s been little reprieve, as layoffs proceed inside native startups in addition to at Europe’s massive tech outposts. At the tip of February, Google confirmed it will reduce 200 jobs from its enterprise in Ireland. 

“The whole tech industry is suffering,” Warner says. “Generally, in 2023 rounds are taking much longer; there’s much less capital available.” 

Against this backdrop it’s unclear whether or not any main European financial institution is in a position or prepared to fill the area of interest that Silicon Valley Bank is leaving. 

“Silicon Valley Bank is unique. There are not that many banks which provide startups loans,” says Reinhilde Veugelers, a senior fellow at financial suppose tank Bruegel and a professor at Belgian college KU Leuven. “Typically, European banks are not good alternatives, because they’re way too risk-averse.” 

And even when a financial institution wished to take the chance, they’d seemingly battle to duplicate Silicon Valley Bank’s deep data of the startup ecosystem, Veugelers provides. “You need way more than deep pockets. You also need to be sufficiently close to the whole venture capital market and have the ability to do due diligence” she says. “If the bank had that capacity, it would have already been doing this.” HSBC didn’t instantly reply to WIRED’s request for remark. 

Silicon Valley Bank was ready to take dangers that different banks would not, says Frederik Schouboe, co-CEO and cofounder of the Danish cloud firm HoldIt. 

HoldIt secured a $22.5 million debt financing bundle—a method of elevating cash by way of borrowing—final yr from Silicon Valley Bank’s UK enterprise. Although the financial institution opened an workplace in Copenhagen in 2019, the department didn’t have a banking license. Mainstream banks “are ultimately impossible to bank with if you are making a deficit in a subscription business,” Schouboe says. “The regulatory environment is too strict for them to actually help us.”

The method Silicon Valley Bank operated in Europe has earned its admirers. But now these persons are nervous the corporate’s collapse will warn different banks away from funding tech in the identical method. It was SBV’s banking practices that failed, not the enterprise mannequin of funding the startup sector, says Berthold Baurek-Karlic, founder and managing accomplice of Vienna-based funding firm Venionaire Capital. “What they did was they made big mistakes in risk management,” he provides. “If interest rates rise, this shouldn’t make your bank go bust.”

Baurek-Karlic believes European startups have been benefiting from the riskier bets that Silicon Valley Bank was taking, comparable to providing enterprise debt offers. The US and UK mentioned Silicon Valley Bank will not be system crucial, arguing there was restricted danger of contagion to different banks. That may be true in banking, he says. “But for the tech ecosystem, it was system critical.”