You might expect Erin Platts to be a little pessimistic, amid the biggest drop in tech stocks in two decades. After all, as the European head of Silicon Valley Bank, her business is entirely dependent on the fortunes of fast-growing tech companies.
But Platts doesn’t downbeat. An American who has lived in the UK for 15 years, she sees benefits in the current downturn, which has introduced a bit more “realism” into public market valuations. “I don’t want to minimize what’s going on from a macro perspective, but I don’t think this recalibration is a bad thing.”
This is good, because SVB has ambitious growth plans. Now with 575 employees in Europe, the bank is transforming its main UK business into a wholly-owned subsidiary and plans to launch a capital markets operation. “Maybe we could hire [for capital markets] next year,” says Platts.
Unsurprisingly, the Nasdaq-listed bank’s own shares have mirrored the slump in the tech sector, falling by a third this year. But it is still valued at 25 billion dollars, not bad for a bank founded in 1983 and which has only 7,000 employees.
The core business is commercial banking, which in the United States lends to more than half of venture capital-backed companies and two-thirds of funds investing in innovation. In recent years, SVB has moved into related areas, including private banking for entrepreneurs, venture capital funds and capital markets.
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Things didn’t always go as planned. SVB started an investment banking business in the US on an acquisition basis just after the dot-com bubble burst, but threw in the towel in 2006. Now it’s up again.
In 2018, she paid $280 million for Leerink, a Boston-based investment bank specializing in healthcare and life sciences. More recently, he began building a technology team under Jason Auerbach, who was hired from UBS where he was global co-head of technology, media and telecommunications investment banking.
Once again, the timing seems unfortunate, coming just as the tech bubble is deflating. Still, Platts is unfazed. Although IPOs have dried up, she expects the sector to “maintain a healthy level of mergers and acquisitions.”
In any case, his immediate priority is not to get into the capital markets, but to set up the board of directors of the new British subsidiary and to “double down” in commercial banking. “We’re recruiting like crazy,” she says.
SVB established itself in Europe in 2005 and the UK was the obvious base, not least because it was the launch point in Europe for most of its US corporate clients and the base for most US funds covering the ‘Europe.
“In 2007, there were four of us with 17 clients,” Platts recalls. SVB continued to invest during the financial crisis and operated as a full-fledged commercial bank from 2012.
Plans to use the UK as a hub to serve the rest of Europe were “really sabotaged” by Brexit as the bank could no longer passport its services to other European countries. The UK’s exit from the EU has made scaling up much more difficult – the bank now offers a full range of services only in the UK and Israel, although it has operations in Germany, in Denmark and Ireland. “The vast majority of the business is in the UK. Then Israel. Everything else is pretty small,” says Platts.
The commercial banking market for high-growth companies is less concentrated in the UK than in the US, with many start-ups opting for challenger banks or fintechs such as Tide or Monzo. Platts says these providers struggle to offer startups a wide range of services as they grow, and companies often switch to other banks such as SVB. “We have to make sure they start with us. Being involved from the start is so important.
Competition has increased from high street banks, as the startup scene has exploded. Platts thinks it could now stop because of all the other distractions for the big banks. Still, demand is expected to be strong. IPOs are being pushed back and companies are reluctant to issue more shares privately, given the pressure on valuations, so many companies will be looking to take on more debt to get by.
Platts is also setting up the group’s fund business in Europe, which is expected to launch next year. In the United States, SVB has just raised its 12th fund of funds and will also market with a life sciences fund and a credit fund.
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Platts is very optimistic about the startup scene in Europe and the UK in particular, but admits there is “a lot to do” to make it as attractive a place as the US to start and grow a business. business.
Government-backed reports from Lord Hill and former Worldpay boss Ron Kalifa were a good start, she says, but more needs to be done to make the London Stock Exchange more attractive as a place to work. IPO and to broaden coverage among analysts and bankers.
Richard Gnodde, head of Goldman Sachs International, recently argued that tech companies can get as good a float price in London as they do in New York, but Platts suggests there’s “still a small valuation discount.”
London attracted several tech IPOs last year but still faces skepticism from some early-stage investors and is fighting hard to persuade Arm, the UK-based chip design company that was listed in London before being acquired by SoftBank, to choose London rather than New York for its return to the public markets.
Platts says it’s very difficult to predict when markets will reopen for IPOs and admits some companies that had planned to float will choose to sell to cash-rich buyers instead. “Will some owners choose to sell their business during this time? For sure. Is it a terrible thing? No. You need some capital recycling in the ecosystem.
Some fintech companies that find growth harder to come by than they hoped will be bought out, but she expects there to be less consolidation than some observers expected.
As for the longer-term outlook for the UK startup scene, recent events have done nothing to dampen its optimism. “The innovation economy in the UK and Europe is going to have a phenomenal five years.”
Brewster High School, New York
BA Business Management and Entrepreneurial Studies, Babson College, Wellesley, Massachusetts
Emea Region Director and UK Branch President, Silicon Valley Bank
Head of Commercial Banking then Head of Relationship Banking, Silicon Valley Bank (UK)
Managing Director, Commercial Banking Silicon Valley Bank (UK)
VP then Director Silicon Valley Bank (United Kingdom)
Customer service then technology bank, Silicon Valley Bank (Boston)
To contact the author of this story with comments or news, email David Wighton