• Home
  •  
    Regions
    • Europe
    • UK & Ireland
    • DACH
    • Nordic
    • France
    • Southern Europe
    • Benelux
    • CEE
    • Asia
  •  
    Deals
    • Buyouts
    • Venture
    • Exits
    • Refinancings
    • Build-up
    • Turnaround
    • Secondaries
    • Advanced deals search
  •  
    Funds
    • Buyout
    • Venture
    • Mezzanine
    • Debt
    • Funds-of-funds
    • Secondaries
    • Fundraising pipelines
    • Advanced funds search
  •  
    GPs & LPs
    • GP profiles
    • LP profiles
    • GP news
    • LP news
    • Sponsors search
    • LPs search
  •  
    Secondaries
    • Deals
    • Funds
    • News
    • Analysis
  •  
    People
    • People moves
    • Analysis
    • In Profile
    • Q&A
    • Videos
    • Comment
  •  
    Analysis
    • In Profile
    • Fundraising
    • Q&A
    • Comment
    • Videos
    • Podcast
    • Reports
    • Data Snapshots
  •  
    Unquote Data
    • Deals search
    • Exits search
    • Funds search
    • Sponsors search
    • Advisers search
    • LPs search
    • League tables
    • Reports
  • Sign in
  • Sign in
    • You are currently accessing unquote.com via your Enterprise account.

      If you already have an account please use the link below to sign in.

      If you have any problems with your access or would like to request an individual access account please contact our customer service team.

      Phone: +44 (0)203 741 1137

      Email: Georgina.Lawson@acuris.com

      • Sign in
     
      • Newsletters
      • Account details
      • Contact support
      • Sign out
     
  • Follow us
    • Twitter
    • LinkedIn
  • Free Trial
  • Subscribe
Unquote
Unquote
  • Home
  • Regions
  • Deals
  • Funds
  • GPs & LPs
  • Secondaries
  • People
  • Analysis
  • Unquote Data
  • You are currently accessing unquote.com via your Enterprise account.

    If you already have an account please use the link below to sign in.

    If you have any problems with your access or would like to request an individual access account please contact our customer service team.

    Phone: +44 (0)203 741 1137

    Email: Georgina.Lawson@acuris.com

    • Sign in
 
    • Newsletters
    • Account details
    • Contact support
    • Sign out
 
Unquote
  • Venture

‘The start-ups are just about alright’: SVB fallout throws focus on UK tech capital demands

  • by Rachel Lewis in London, with additional reporting by Josh O'Neill and analytics by Jonathan Klonowski
  • 14 March 2023
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Google plus  
  • Send to  

Start-ups in the UK should emerge dazed but unharmed following the emergency buyout of failed lender Silicon Valley Bank (SVB), market participants in the space have told sister publication Mergermarket, with several saying that it might cause a small dent in confidence but should not be seen as a wider reflection on venture capital nor the tech sector.

“A lot of the affected companies have gained [venture capital] investment because of fundamentally good technology or business model – that fact is still exactly the same as it was last week,” said one growth equity investment banker. “All they have done is move money from one bank to another.”

The UK government- and Bank of England-engineered sale of SVB’s UK operations to HSBC yesterday (13 March) has largely reinforced certainty that the tech is still as investable as it was last Wednesday. SVB UK holds some GBP 7bn in customer deposits, with the UK’s deposit guarantee scheme only covering the first GBP 85,000 in the event of a bank collapse. Hence several nervy founders and CFOs over the weekend.

Yet even before the latest drama, these executives were already tackling a capital headache. So far this year, UK start-ups have raised just GBP 1.2bn in equity compared to GBP 4.6bn over the same period in 2022, according to Dealogic data.

Fearful of a down-round akin to Klarna’s 85% drop in valuation, many have – perhaps counterintuitively – reacted to a rising cost of capital by plugging the gap with venture debt or other non-dilutive capital solutions.

Last month, UK-based vehicle financing firm Carmoola raised a Series A, comprised of GBP 8.5m in equity and a GBP 95m debt facility from Natwest to help scale its business. Tech valuations took a knock and the cost of capital became an ever hotter topic last summer, UK-based digital healthcare start-ups like Cera Care were turning to debt and equity mixes.

Nothing ventured…
Here’s where SVB comes in. It had been one of the key players providing these alternative capital solutions, providing venture debt, growth loans and credit lines, mezzanine loans and buyout finance.

The bank said in its H1 2023 report that the “party is over” with valuations returning to normal and early-stage companies, in particular, seeking higher liquidation preferences that “protect founders from the bad optics” of a valuation hit but make it harder to bring in new investors that will insist on the same terms.

Private lenders have been on the front foot trying to pitch their solutions, according to one investment banker, although venture debt funds themselves are still relatively small when compared to the needs of the market. Hambro Perks and Shard Credit both held first closes last year at GBP 100m and GBP 75m, respectively.

The question now is what HSBC will do with its new book. The breakneck pace of the deal means that the due diligence of unearthing exactly what they have bought has only just started. One fund manager speaking to Mergermarket said they were worried the bank will pay less attention to early-stage biotech due to the higher risk profile, while noting the deal will include the movement of people that can plug a knowledge gap.

It’s worth noting HSBC has already made an initial move into tech capital solutions, having launched a “growth lending” offering for high-growth tech businesses in July 2022.

The GBP 250m fund provides access of up to GBP 15m to start-ups, “targeting IP and tech-rich businesses in cloud or software, healthtech or edtech, fintech or advanced manufacturing”, according to an HSBC press release at the time. It sits alongside other funds including HSBC UK’s GBP 500m fund for SME tech businesses.

SVB UK depositors can rest easy now. But when rising capital cost pushes tech execs towards more costly debt for fear of marking to market a dented equity valuation, further funding obstacles may prove more challenging to navigate.

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Google plus  
  • Send to  
  • Topics
  • Venture
  • Benelux
  • Technology
  • CEE
  • DACH
  • France
  • Nordics
  • UK / Ireland
  • Southern Europe
  • HSBC

More on Venture

Andris K. Berzins of Change Ventures
Change Ventures aims to hold final close for EUR 20m third fund by mid-2024

Estonia-registered VC could bolster LP base with fresh capital from funds-of-funds or pension funds

  • Funds
  • 31 August 2023
Reima Linnanvirta of Trind VC
Trind VC plans up to five early-stage investments in next six months

VC has deployed around 10% of its second, EUR 55m fund and plans to invest in up to 40 startups

  • Venture
  • 31 August 2023
Fund launches in euros
Iron Wolf Capital targets EUR 70m for second vehicle

Baltic investor anticipates early 2024 launch and will focus on early-stage AI and deeptech startups

  • Funds
  • 30 August 2023
Lauri Isotamm of Siena
Siena aims to hold new VC secondaries fund first close in late 2023 or early 2024

Secondary investments specialist will target EUR 30m to EUR 50m for new fund

  • Funds
  • 29 August 2023

Latest News

Fund closes in US dollars
  • Funds
Stonehage Fleming raises USD 130m for largest fund to date, eyes 2024 programme

Multi-family office has seen strong appetite, with investor base growing since 2016 to more than 90 family offices, Meiping Yap told Unquote

  • 05 September 2023
Clinical trials and biotechnology
  • Buyouts
Permira to take Ergomed private for GBP 703m

Sponsor deploys Permira VIII to ride new wave of take-privates; Blackstone commits GBP 200m in financing for UK-based CRO

  • 04 September 2023
Public sector software
  • Exits
Partners Group to release IMs for Civica sale in mid-September

Sponsor acquired the public software group in July 2017 via the same-year vintage Partners Group Global Value 2017

  • 04 September 2023
EMEA Public to Private M&A
  • Investments
Change of mind: Sponsors take to de-listing their own assets

EQT and Cinven seen as bellweather for funds to reassess options for listed assets trading underwater

  • 04 September 2023
Back to Top
  • About Unquote
  • Advertise
  • Contacts
  • About Acuris
  • Terms of Use
  • Privacy Policy
  • Group Disclaimer
  • Twitter
  • LinkedIn

© Merger Market

© Mergermarket Limited, 10 Queen Street Place, London EC4R 1BE - Company registration number 03879547

Digital publisher of the year 2010 & 2013

Digital publisher of the year 2010 & 2013