Late last Friday evening, rumblings of an unforeseen and significant economic crisis were in play. By the next morning, it was clear that there was no viable future for Silicon Valley Bank (SVB).
Over the weekend, a collective, formidable, and focused force of U.K.-based tech leaders and investors came together to speak to the government and those companies directly affected by the bank’s collapse. The aim? To catalyze a reaction and commit to action.
The scale of the crisis
The collapse of SVB could have had a disastrous impact on the U.K.’s thriving tech ecosystem. Some 3,000 tech firms were at risk of going under.
But the extent to which our community had relied upon the bank had, until that point, never been established, and therefore the severity of the news was not immediately clear.
There had never been cause to establish how popular SVB U.K. really was.
What ensued was a swift undertaking to process who would be affected and, most importantly, how.
The findings were pretty alarming. Early calculations estimated that up to 40% of U.K. startups held accounts or a relationship with SVB.
Without rescue, one leading health-tech business that works with the National Health Service would have closed its doors on Monday, impacting NHS patients. Countless founders candidly revealed that they would be days away from being unable to pay their staff or suppliers. Investors who might normally backstop their startups in an emergency situation also banked with SVB and were locked out.
Panicked emails and an influx of distressed messages on social media showed that this was swiftly evolving into nothing short of a devastating crisis for the U.K. tech sector. A total of 1.8 million people are employed within the U.K. startup scene, not to mention the countless suppliers and providers.
Despite its relatively smaller size, the U.K.’s trillion-dollar tech industry sits behind the U.S. and China on the world stage. One of the world’s leading tech ecosystems was suddenly in jeopardy.
A coordinated response
Connected via a WhatsApp group, individuals across the ecosystem coordinated a response.
A core group assembled, reaching out to affected businesses to establish the impact. Others opened lines of communication with government departments and agencies, with a clear message that matched the name of our WhatsApp group: Save U.K. Tech.
The U.K. Treasury officials requested that impacted startups contact them immediately, so they could assess the scale of the situation. A solution was needed quickly, preferably before markets opened on Monday. Without it, the U.K.’s tech sector would have been decimated.
One solution stood out amongst all others: a buyout. That became the focal point of our conversations and drove the pressure that the community applied on the government. A number of banks and other organizations expressed interest in SVB U.K. and had to move quickly with their bids and proposals.
HSBC’s rescue came down to nail-biting talks in the early hours, before the market opened on Monday.
Credit must go to the government and the Bank of England. There was swift action from the chancellor of the exchequer and the prime minister to put the deal together, once the buyer was agreed.
It was essential work in safeguarding the U.K.’s startup ecosystem and tech industry and a recognition of our strategic importance to the wider economy.
The response showcased U.K. tech at its best. Our ecosystem may not be comparable to Silicon Valley in terms of size and history, but it continues to punch above its weight.
Perhaps more importantly, we all understand the importance of collaboration. The unique mix of investors, founders, industry volunteers, and government coming together in a matter of hours was remarkable. The unwavering commitment and maturity of the bodies that collectively stood up for the tech community (the likes of Coadec; Tech Nation; BVCA; the Centre for Finance, Innovation and Technology; and Tech London Advocates) put the situation firmly on the Treasury’s agenda.
It was an intense weekend; the situation was desperate. But in the coming weeks and months, analysts will no doubt pore over the details of what went wrong and why, establishing long-term lessons to take forward.
In the meantime, there is one immediate and obvious lesson to be learned, and startups and investors alike must take heed: The danger of putting all eggs in one basket is real. Businesses must ensure they diversify financially.
The sector’s response was a testament to the unity, focus, and strength of the tech community and its diverse leaders. We now know that while the strength of this ecosystem emerged in many ways from the shadow of 2008, it is not immune to crisis itself. The tale of SVB is a word to the wise.
SVB leaves a thought-provoking legacy in its wake for bankers, too. Despite SVB’s collapse, the financial sector should consider what it is that the bank did so well. Why did so many tech businesses bank with it?
Put simply, SVB built a track record in understanding tech and what it means to be a startup, which, in turn, created a loyal customer base. There is a silver lining to this narrowly avoided crisis, not only for HSBC but also for any bank that takes the reins and shows that it gets startups—and the role we play at the very heart of the innovation economy.
Russ Shaw, CBE, is the founder of Tech London Advocates and Global Tech Advocates, an independent, grassroots network of 30,000-plus tech leaders, experts and investors.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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