SVB: the bank for European scale-ups that understood startups. Who will step in?

It’s no secret that the Silicon Valley Bank’s (SVB) collapse has shaken the startup ecosystem. The fallout has extended beyond the North American market, raising concerns for Dutch and European founders, investors, and scaleups conducting business internationally using one of SVB’s services.

In the short term, startups who use their services will experience issues meeting payroll and paying service providers while working around the clock to find a new banking solution.

We now know that all deposits in both the US and the UK will be covered, avoiding a potentially fatal verdict for affected startups.

However, the long-term effects within the Dutch and European space could be significantly direr than navigating the short-term troubled waters. SVB was one of the few banks specialized in serving startups, offering services including venture debt and a community space for founders.

Anyone running a startup or early-stage venture fund knows how difficult it is to deal with traditional banks who don’t know how to look at startup performance.

SVB understood how to evaluate a startup or scaleup, and working with founders was ingrained in their culture. Part of their strategy was to employ previous founders and VCs to open up new markets and build relationships with the most important community players. 

This week, stories from founders who received help from SVB can be found all over social media.

SVB was the premier bank for US-based startups and VC firms, doing business with thousands of startups, over 700 unicorns, and Y Combinator and Sequoia Capital. These relationships paired with their unique approach to venture debt – a type of loan designed specifically for early-stage, VC-backed companies– allowed SVB to support innovative and pioneering startups.

For European and Dutch startups looking to scale beyond their home market, SVB was a critical, efficient, and cost-effective partner.

SVB’s collapse clearly limits the market for US-based founders. Still, Dutch and European startups hoping to scale their business internationally could experience challenging times beyond finding an international banking service that works for them.

European regulators continue to roll out compliance requirements for startups, and these compliance obligations will require more resources and people (e.g KYC, Data Act, AI Act).

ESG regulations within the EU have also grown more comprehensive within the past few years for both startups and investors (e.g. SFDR Art 8 and 9).

Assuring these regulations is difficult for European startups gaining traction within their regional market – entering new markets means even more time, money, and resources to maintain compliance.

We anticipate an increase in the cost of professional services, which will be reflected in future investor pitch decks. 

Without a specialized partner like SVB to support startups navigating compliance requirements and transitioning into the US market, Dutch and European founders hoping to scale might find themselves adrift.

Big banks like JP Morgan or Wells Fargo do not currently have the flexibility or profile to understand startups in the same way SVB did due to their culture and core business. Neo banks might be adaptable enough to pick up the slack.

Still, without a strong community, they may not be able to offer the same industry and ecosystem support pioneered by SVB.

For now, the hole left in the wake of SVB’s collapse remains unfilled. As for who steps up to fill it, only time will tell.