Silicon Valley Bank’s struggles began with a failed bet on long-term US bonds. Rising interest rates meant that the value of these bonds fell. When depositors began to worry about the bank’s balance sheet, they pulled out their money. High interest rates have become a problem for the entire industry, ending the cheap loans that technology companies have become accustomed to over the past decade and reducing available financing.

Europe’s tech industry is set to lose more than $400 billion in value in 2022, while some companies, such as buy-now-pay-later supplier Klarna, have seen their valuations drop by more than 85 percent. The reprieve has been slight this year as layoffs continue at local startups as well as Europe’s major tech hubs. In late February, Google confirmed it would cut 200 jobs from its Irish business.

“The whole tech industry is suffering,” says Warner. “Typically in 2023 the rounds take a lot longer; there is much less available capital.’

Against this backdrop, it is unclear whether any major European bank is able or willing to fill the niche left by Silicon Valley Bank.

“Silicon Valley Bank is unique. There aren’t that many banks that lend to startups,” says Reinhilde Voigelers, a senior researcher at the Bruegel economic think tank and a professor at KU Leuven in Belgium. “Generally, European banks are not a good alternative because they are too risk-averse.”

And even if the bank wanted to take the risk, it would likely struggle to replicate Silicon Valley Bank’s deep knowledge of the startup ecosystem, Veugelers adds. “You need a lot more than deep pockets. You also have to be close enough to the entire venture capital market and be able to do your due diligence,” she says. “If the bank had such capabilities, it would already be doing this.” HSBC did not immediately respond to WIRED’s request for comment.

The Silicon Valley bank was willing to take risks that other banks wouldn’t, says Frederik Schubo, co-founder of Danish cloud startup KeepIt.

Last year, KeepIt received a $22.5 million debt financing package from British business Silicon Valley Bank, a way of raising money through loans. Although the bank opened an office in Copenhagen in 2019, the branch did not have a banking license. The mainstream banks are “definitely impossible to work with if you create a deficit in subscriptions,” Schubo says. “The regulatory environment is too strict for them to really help us.”

The way Silicon Valley Bank operated in Europe earned its fans. But now those people worry that the company’s collapse will deter other banks from funding technology in the same way. It was SBV’s banking practices that failed, not the business model of funding the startup sector, says Berthold Baurek-Karlik, founder and managing partner of Vienna-based investment firm Venionaire Capital. “They made big mistakes in risk management,” he adds. “If interest rates go up, it doesn’t have to cause your bank to fail.”

Baurek-Karlic believes that European startups have benefited from riskier bets that Silicon Valley Bank has made, such as offering venture capital debt deals. The US and UK have said the Silicon Valley bank is not system-critical, arguing there is a limited risk of contagion to other banks. That may be true in banking, he says. “But it was critical to the technology ecosystem.”

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