HSBC has hired more than 40 former Silicon Valley Bank employees to create its own practice focused on health care startups and venture capital funds in the U.S., hitting the gas on its entrance to a sector that experts say is challenging for banks.
The formation of the new line of business marks London-based HSBC’s second successful grab at Silicon Valley Bank offerings, following its acquisition of the failed bank’s United Kingdom subsidiary for one British pound last month. The Santa Clara, California-based bank was a stalwart financial institution for the high-risk world of technology startups and venture capital firms, even amid a tough market for fundraising, until its collapse in March.
Michael Roberts, CEO of HSBC USA and Americas, said in a prepared statement that the new team, which includes four former practice leaders at SVB, will be able to support companies at each phase of their growth, from early stage to multinational.
“We know that companies are scaling globally earlier in their life cycle and we want to bring the full breadth of our domestic and international capabilities to be the bank for entrepreneurs,” said Roberts in the statement. “This effort demonstrates our commitment to serving the innovation economy.”
Dozens of former Silicon Valley Bank employees in the San Francisco Bay Area, Boston and New York City will offer banking products for startups in the health care and life science space, as well as provide connectivity to HSBC’s resources across the pond.
First Citizens Bank, which announced it would acquire SVB in late March, has similar ambitions. The Raleigh, North Carolina, company said in investor presentations that one of the draws of the deal was its ability to expand offerings in the private equity, venture capital and technology sectors, specifically citing life science and health care.
Although HSBC picked off 40 bankers, First Citizens is still “confident that Silicon Valley Bank will continue playing a leading role in supporting the innovation economy,” said spokesperson John Moran in an email to American Banker shortly after the news broke that HSBC had hired 40 employees from SVB.
“First Citizens acquired Silicon Valley Bank knowing it had the deepest bench of experts serving the innovation economy and that remains unchanged,” Moran said in the email. “This strong team, with decades of experience, is focused on what has always set SVB apart — providing the best client service in the industry.”
The HSBC team will be led by David Sabow, former head of technology and health care for SVB in North America. Sabow had been tapped in December as CEO of Silicon Valley Bank U.K., pending regulatory approval, but hadn’t officially stepped into the role before the failure.
Sabow said in a prepared statement that HSBC will channel “the full strength of their platform toward the innovation economy.”
HSBC also brought on: Sunita Patel, formerly chief business development officer at SVB, to oversee investor coverage and business development of the practice; Katherine Andersen, who was SVB’s head of U.S. life science and health care relationship and corporate banking, to lead the same sector; and Melissa Stepanis, who was head of technology credit solutions at SVB, to oversee technology.
The London bank’s domestic arm primarily offers wealth management and commercial banking. The new practice will sit in the commercial banking business.
“HSBC USA’s mission is to support the growth ambitions of our international client base and serve as an anchor point for the global HSBC network with our integrated wholesale banking and wealth platform,” said Matt Ward, head of communications for HSBC USA, in an email to American Banker. “The U.S. startup market is weighted to sectors aligned to our areas of focus, notably technology and life sciences, that are naturally oriented to international banking needs in the future.”
Silicon Valley Bank’s failure has posed a potential hole in the volatile startup industry. The bank provided crucial services to the industry, like venture debt, a vast network of contacts and industry-specific expertise. While SVB clients were initially looking for a safe place to park their deposits, the tighter capital-raising environment also leaves startups needing other banking services, like lending.
The startup ecosystem that SVB built isn’t easily replicable, said Neil Hartman, a senior partner at consulting firm West Monroe. He said that startup portfolios are often less profitable, due to lower revenue generation.
“There aren’t very many banks that can offer what SVB can offer, or could offer, today,” Hartman said in an interview shortly after the collapse of the bank in mid-March. “Everyone’s going to have to build into that. It’s not something that’s going to happen overnight.”
Ronak Doshi, a partner focused on digital transformation and banking at research firm The Everest Group, said in a mid-March interview that startups want to bank with institutions that have specific verticals focused on their sectors, like life sciences and health care.
HSBC’s acquisition of SVB’s United Kingdom business last month included the failed bank’s staff, assets and liabilities, expanding the company’s offerings for the startup and technology sector abroad.
“This acquisition makes excellent strategic sense for our business in the U.K.,” said CEO Noel Quinn in a prepared statement at the time. “It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life science sectors, in the U.K. and internationally.”
HSBC isn’t the only financial institution to recently pick up SVB executives. In late March, Stifel Financial hired three former SVB banking leaders as managing directors to expand its startup and venture practice, providing commercial banking and lending, along with sponsor finance, treasury and other services.
Stifel hired Jake Moseley, former head of relationship management technology banking at SVB; Matt Trotter, former head of frontier technologies and climate technology and sustainability at SVB; and Ted Wilson, former head of enterprise software at SVB.
“We believe that Stifel is the best place for us to continue our mission of providing best-in-class financial services to entrepreneurs and their investors,” said Moseley, Trotter and Wilson, in a joint statement last month.
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