05 Nov 2020
Silicon Valley Bank discusses 2020 economic reform and the role the tech sector will play
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Erin Platts, Head of EMEA and UK president for Silicon Valley Bank discusses key differences between the mindset, ambition levels and appetite for risk of US tech businesses and their European equivalents.
Mike Drew (Partner and Head) of Odgers Berndtson Executive Search’s Global Technology Practice, and Nick Miller (Partner) of Odgers Berndtson Executive Search’s Financial Services Practice, delve into the question of what shape economic reform will appear in and what role the tech sector will play in this recovery.
Mike: A very warm welcome to the next in our series of “At Home Interviews” with International Business Leaders. Today, I am delighted to be joined by Erin Platts, Head of EMEA and UK president for Silicon Valley Bank (SVB). I am also joined by my colleague, Nick Miller, who is a partner in our Global Financial Services practice. Erin and Nick, a very warm welcome to you both.
Nick: Erin, thank you very much for joining us for this session, can you tell us a little bit about both SVB in Europe and your career to date?
Sure. Mike, Nick, thanks again for having me this morning. I am excited to talk to you about Silicon Valley Bank and what we are seeing across our client base.
At Silicon Valley Bank, we are a simple traditional commercial bank, but we happen to work with the most innovative companies globally. Our remit is to support innovation businesses from early-stage start-ups, through to public and private corporates, and everything in between, as well as the venture capital and private equity funds that invest in innovation and outside of it.
Like a traditional commercial bank, we provide banking, lending, and financing solutions. Given our core focus on those two sub-sectors, we have built up a strong brand and understanding of how innovation businesses scale and grow. We try to leverage that expertise in pattern recognition to help our clients be successful.
Across EMEA, we have 400 people across 5 countries and around 3,000 clients that, again, are a mix of innovation businesses from early-stage start-ups, venture-backed, PE-backed or public corporates, and then the venture capital and private equity funds as well.
My role is leading our EMEA business. I have been with Silicon Valley Bank for over 16 years now. I guess time flies when you are having fun. Started in the US, and I moved over here in 2007, when there was about four or five of us on the ground, really to help figure out what could Silicon Valley Bank become in the UK and Europe, to get to know the market a little bit better, and, of course, to grow the team and the client base. It has been a fun, challenging, exciting decade-plus, both within SVB, and seeing the ecosystem grow and thrive in that period as well.
Watch a ten-minute video of 'The key differences between the mindset of US tech businesses and their European equivalents’ interview with Erin Platts Head of EMEA and UK president for Silicon Valley Bank.
Erin, having lived and worked in both the US and in Europe, what are the key differences between the mindset of US tech businesses and their European equivalents?
If you asked me that back in 2007, I would say the difference would be really quite stark, but it's actually really converged, in terms of what we're seeing, and the expectations, the ambition, of innovation businesses here versus the US. The biggest difference, a lot of, is driven just by the size and maturity of the respective markets. The US has been around for a lot longer, with multiple cycles and a large amount of capital. The sophistication of the whole ecosystem is a couple of decades further along than what we have got in the UK, and Europe more broadly.
In the last five to seven years, we have seen just a huge amount of momentum across the innovation sector. We have seen several repeat entrepreneurs that have started companies, sold companies, and are doing again, so that pattern recognition and flywheel is starting to turn. We have seen a lot more cross-fertilization between the markets as well.
“Maybe back in 2007-2009, maybe the ambition level wasn't the same, the expectations around fundraising were a lot lower, that delta has really shrunk pretty substantially.”
There is still is a bit of a difference in terms of style. For our clients that are looking to expand in the US, one of the hardest roles that they find, to fill, is head of sales for an enterprise software company, as an example. The style and expectations of selling is a little bit different, and something that we just need to be cognizant of, on both sides of the Atlantic. There are still some differences in terms of market dynamics that we can talk about, but I am excited to say that delta between expectations and ambition has really closed.
When you think about entrepreneurship in Europe versus the US, is there a difference in mindset, particularly around the willingness to fail and go again?
That absolutely was the case, 10 to 12 years ago, where the ambition and expectations of some of the founders that we saw in the UK was, to build a really solid, local business and selling it for 100 million; that would be deemed as hugely successful. Of course, that is successful, but now, we are seeing founders with the ambition to create and grow global category leaders. That is a huge shift that we have seen in the last five to seven years.
“The appetite for risk and the appetite for failure has increased, but I also think it's due also because of structural change. If you have got additional sources of capital locally, if you have more sophistication around founder liquidity earlier in the process, that all invents risk-taking.”
It is not just a mental shift. Part of it is a structural shift as well, as the market has evolved and become more sophisticated.
There has been quite a lot of discussion in the media around K-shaped economic recoveries. Is this a model you recognize? I know there's been a lot of discussions of different shapes of recoveries in the last six months, but is the K-shape one you recognize, and especially where it relates to the tech businesses you spend so much time with?
This is the hard crystal ball-type question, K-shaped, V-shaped, U-shaped. Taking a step back, fundamentally, do I believe that the innovation and tech sector is going to be a key driver and key leading light to help the UK to deal with the repercussions of COVID, and to manage through an economic recovery? Absolutely.
“If you take a step back, and you look at the ingredients, and the dynamics at play, there are huge amounts of dry capital sitting on the side-lines from a venture and private equity perspective.”
There is too much quality in terms of the companies that have been started and built over time across a variety of different sub-sectors. We are not just dependent upon fintech or enterprise software or consumer businesses. There's huge diversification from a sub-sector perspective. We cannot ignore what is happening externally with respect to the economy, with respect to COVID, and the increase in the numbers that we are seeing.
While I remain bullish that the tech sector's going to be a leading light, to help with economic recovery, we are going to have a really challenging six to nine months ahead. It will further bifurcate the market. There's going to be a number of companies that are going to thrive, that are going to access the dry powder that I was referring to, but there's going to be a number, particularly at the earlier stages that have less traction, more thinly capitalized, or those companies that are much more capital-intensive, that may struggle.
A lot of the companies that we work with across our portfolio are loss-making businesses, they are funded by venture capital firms. They've kind of pulled all the levers that they have got access to now. They have cut spend, they furloughed staff, they have taken out discretionary costs, they have drawn on their banking facilities, they have raised an inside round. There is not a whole lot of additional action they can take to extend the runway if we continue to see the repercussions of COVID for a longer period.
Erin, thank you. That brings us to an end to part one but do join us again shortly for part two.