All of this was triggered by the collapse of SVB last week, highlighting the vulnerabilities of certain banks to interest rates which have been increased significantly over the past year. Even now a list of medium sized banks in the US remain at risk.
But while the focus has been on the banking sector what could this mean for the UK tech ecosystem and how will the impact of higher fundraising costs affect small start-ups that lack profits and in some cases revenue?
Some experts suggest that we’re likely to see a significant uptick in M&A activity; others have suggested that a pause in interest rate hikes could spark a return to growth in the second half of 2023.
Whatever the changes, and there will be changes as a consequence of SVB’s collapse and the demise of Credit Suisse, it is likely we’ll see a new funding landscape for innovators in the years ahead which will require new funding sources, different goals and growth models.
These collapses should be seen as a warning signal for startups, especially given that both banks in question were active in the startup funding arena. While SVB was well known to be active in this space, it has now come to light that Credit Suisse took part in at least seven venture or debt financing rounds for startups in the past year alone.
These failures have removed major players in financing startups and this will certainly complicate how we look to fund science-based businesses in future and how they look to create real long-term value.
