Silicon Valley Bank’s Erin Platts: Tech stock’recalibration’ is no bad thing

You might expect Erin Platts to be a bit downbeat, amid the biggest slump in technology stocks in two decades. After all, as European head of Silicon Valley Bank, her business depends entirely on the fortunes of fast-growing tech companies.

But Platts doesn’t do downbeat. An American who has lived in the UK for 15 years, she sees upside in the current downturn, which has introduced a bit more “realism” into public market valuations. what is happening from a macro perspective, but I don’t think this recalibration is a bad thing. ”

That’s just as well, as SVB has ambitious growth plans. Now boasting 575 employees in Europe, the bank is turning its main UK operation into a fully-fledged subsidiary and plans to start a capital markets operation. [for capital markets] next year, ”Platts says.

Unsurprisingly, the bank’s own Nasdaq-listed shares have mirrored the plunge in the tech sector, falling by a third this year. But it is still valued at $ 25bn — not bad for a bank founded in 1983 and which has only 7,000 employees.

The core of the business is commercial banking, which in the US lends to more than half venture capital-backed companies and two-thirds of funds investing in innovation. In recent years, SVB has moved into related areas including private banking for entrepreneurs, venture capital funds and capital markets.

READ Schroders eyes some embattled Faangs as tech names approach value stock territory

Things have not always gone entirely to plan though. SVB started a US investment banking business based on an acquisition just after the dotcom bubble burst, but threw in the towel in 2006. Now it is having another go.

In 2018 it paid $ 280m for Leerink, a Boston-based investment bank focused on healthcare and life sciences. More recently, it has started building a technology team under Jason Auerbach, who was hired from UBS where he was global co-head of technology , media and telecom investment banking.

Once again, the timing looks unfortunate, coming just as the technology bubble deflates. Yet Platts is unfazed. Although company flotations have dried up, she expects the sector to “maintain a healthy level of M & A”.

In any case, her immediate priority is not moving into capital markets, but setting up the board for the new UK subsidiary and “doubling down” in commercial banking. “We are recruiting like crazy,” she says.

SVB moved into Europe in 2005 and the UK was the obvious base, not least because it was the launch point in Europe for most of its US corporate clients and the base for most US funds covering Europe.

“In 2007 there were four of us with 17 clients,” Platts recalls. SVB continued to invest during the financial crisis and operated as a full commercial bank from 2012.

The plan to use the UK as the hub for serving the rest of Europe was “really scuppered” by Brexit, because the bank could no longer passport its services into other European countries. The UK’s exit from the EU has made scaling up much harder — “The vast majority of the business is in the UK. Then Israel. Everything else is pretty tiny,” the bank now offers a full range of services only in the UK and in Israel, although it has operations in Germany, Denmark and Ireland. Platts says.

The commercial banking market for high-growth firms is less concentrated in the UK than in the US, with many early stage companies opting to go with challenger banks or fintechs such as Tide or Monzo. Platts says these providers struggle to offer startups a broad range “We need to make sure they start with us. Being involved in the early stage is so important.” Of services as they grow and companies often graduate to other banks such as SVB.

Competition has increased from the high street banks, as the venture startup scene has exploded. Platts believes that may now pause because of all the other distractions for big banks. Yet demand is likely to be strong. IPOs are being pushed back and firms are loath to issue more shares privately, given pressure on valuations, so many companies will be looking to take on more debt to tide them over.

Platts is also setting up the group’s funds business in Europe, which is due to be launched next year. In the US, SVB is just raising its 12th fund of funds and is also going to market with a life sciences fund and a credit fund.

READ Banking giants told to move staff to Europe as ECB Brexit review finds’empty shells’

Platts is very bullish about the startup scene in Europe and in the UK in particular, but she admits there is a “whole lot to do” to make it as appealing a place as the US in which to start and scale a business.

Government-backed reports by Lord Hill and ex-Worldpay boss Ron Kalifa were a good start, she says, but more needs to be done to make the London Stock Exchange more attractive as a flotation venue and to expand the depth of coverage among analysts and bankers.

Richard Gnodde, head of Goldman Sachs International, recently claimed that technology companies can get as good a price floating in London as in New York, but Platts suggests there is “still a bit of a valuation discount”.

London attracted several tech IPOs last year but still faces skepticism from some early-stage investors and is fighting hard to persuade Arm, the UK-based chip design firm that had a London listing before being acquired by SoftBank, to choose London over New York for its return to the public markets.

Platts says it is very hard to predict when the markets will reopen for IPOs and concedes that some companies that had planned to float will opt to sell out to cash-rich buyers instead. “Will some owners choose to sell their company in this period? For sure. Is that a terrible thing? No. You do need some recycling of capital into the ecosystem. ”

Some fintech companies that find growth harder to come by than they hoped will be bought out, but she expects there will be less consolidation than some observers forecast.

As for the longer-term prospects for the UK’s startup scene, recent events have done nothing to dampen her optimism. “The UK and European innovation economy is going to have a phenomenal five years.”

CV

Born

December 1981

Education

1996-2000

Brewster High School, New York

2000-2004

BA Business management and entrepreneurial studies, Babson College, Wellesley, Massachusetts

Career

2019-present

Head of Emea and president of UK Branch, Silicon Valley Bank

2017-19-19

Head of commercial banking then head of relationship banking, Silicon Valley Bank (UK)

2014-16

Managing director, commercial banking Silicon Valley Bank (UK)

2007-2013

VP then director Silicon Valley Bank (UK)

2004-07-07

Client service then technology banking, Silicon Valley Bank (Boston)

To contact the author of this story with feedback or news, email David Wighton

..