Silicon Valley Bank yesterday opened its first UK branch in London, offering commercial banking services for technology start-ups in the capital. This is significant because one of the notable criticisms of London's Tech City cluster has been the shortage of “smart” investors that understand the technology market.

At the InnoTech Summit in April, for example, Pond Ventures co-founder Charles Irving told delegates that many European entrepreneurs are still looking for investment in Silicon Valley rather than the UK, because Silicon Valley investors are smarter.

“If you want to raise money you don't want to pitch to a stiff shirt in the City across the table who does not understand your business. You want to pitch to people who understand your business. Investors have to remain experienced,” he said at the time.

So is SVB's decision to open a UK branch a sign that the problem is finally being addressed? Or is it just further confirmation that the British financial sector lacks the specialist expertise to support the UK technology industry?

techcity20_hr.jpgSVB is not an investor itself, but provides financial services to some of the top investors in the sector including NEA, Sequoia Capital and Silver Lake. It is also a crucial part of the innovation ecosystem in Silicon Valley, offering loans, cash management services and trade finance to early-stage companies.

In this sense, SVB's presence in the UK is likely to make Tech City a more attractive place to set up shop, because entrepreneurs will have access to tailored financial services that are suited their needs. Moreover, venture capitalists will have more support, which could potentially lead to in increase in specialised investors.

Keith Lovell, CFO of British mobile music app firm Shazam, which is already an SVB client, said that SVB is “a true partner, offering flexible financing solutions, great networking opportunities, excellent and personable client service and an in-depth knowledge of the global innovation ecosystem.”

Meanwhile TIGA, the trade association representing the UK video games industry, said the launch of SVB in London could lead to more choice in financial products for games developers and other high technology businesses.

“The bank understands the needs of technology companies. This is good news for games developers and digital publishers and other high technology firms, which often struggle to persuade other banks of their value and potential,” said Dr Richard Wilson, CEO of TIGA.

“TIGA research published in October 2011 showed that two fifths of developers reported difficulty in accessing finance. This needs to change if the UK high technology sector is to fulfil its potential.”

While Tech City will undoubtedly benefit from SVB's presence in the UK, it is perhaps disappointing that these kind of financial services had to be provided by a US firm. If, as the government hopes, the technology sector is to drive economic recovery, the city needs to do a better job of supporting local businesses.

In theory, the recognition of Tech City's potential by SVB, with its extensive knowledge of the global technology investment market, should kickstart more interest from the city. It might even give tech enterpreneurs the confidence they need to grow their businesses in the UK, rather than selling out to big US companies at the sniff of the first million.

We can only hope.