WHAT YOU NEED TO KNOW!
- The collapse of Silicon Valley Bank is causing panic among startup founders in California’s Bay Area about access to money and paying employees.
- Fears of contagion have spread to Canada, India, and China, and in the UK, SVB’s unit is set to be declared insolvent, has ceased trading, and is no longer taking new customers.
- SVB had branches in China, Denmark, Germany, India, Israel, Sweden, and Canada. Founders are warning that the bank’s failure could wipe out startups around the world without government intervention.
The collapse of Silicon Valley Bank (SVB) has triggered panic among startup founders in California’s Bay Area over their access to funds for paying employees and running their businesses. The effects of the bank’s collapse are being felt globally, with Canada, India, and China among the countries expressing concern about contagion. In the UK, SVB’s unit has ceased trading and is set to be declared insolvent.
A letter signed by around 180 tech companies’ leaders has urged UK Chancellor Jeremy Hunt to intervene, fearing that many businesses could be forced into involuntary liquidation overnight.
“The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” the letter stated, according to Bloomberg.
SVB’s branches in China, Denmark, Germany, India, Israel, Sweden, and Canada have heightened fears that the bank’s collapse could wipe out startups worldwide. Startups rely on deposits to fund costly expenses such as research and development costs and staff salaries, making SVB’s bankruptcy or restructuring potentially devastating for the industry.
A deeper concern among startup leaders is that the bank’s collapse will hamper future venture capital funding for UK businesses, already affected by Brexit. The UK Treasury has begun surveying startups to determine how much they have on deposit, their cash burn rate, and their access to banking facilities at SVB and beyond.
Startups are anxiously waiting for news about how their deposits at the bank will be handled. Lingumi CEO Toby Mather, whose UK-based education software startup has 85% of its cash in SVB, expressed concern about the situation, calling it “life or death” for his company.
London-based genomics startup Ochre Bio’s founder, Jack O’Meara, spent the weekend trying unsuccessfully to move deposits out of SVB.
“If there is no intervention,” he warned, “it could really wipe out a generation of entrepreneurial companies.” Jack O’Meara