FILE PHOTO: British Chancellor of the Exchequer Jeremy Hunt leaves his house in London, Britain, November 14, 2022. REUTERS/Toby Melville
LONDON: The fallout from the collapse of Silicon Valley Bank (SVB) is beginning to spread around the world.
Startup founders in California’s Bay Area are panicking about access to money and paying employees.
Fears of contagion have reached Canada, India and China.
In the UK, SVB’s unit is set to be declared insolvent, has already ceased trading and is no longer taking new customers.
Last Saturday, the leaders of roughly 180 tech companies sent a letter calling on UK chancellor Jeremy Hunt to intervene.
“The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” they said in the letter seen by Bloomberg.
“Many businesses will be sent into involuntary liquidation overnight.”
This is just the beginning.
SVB had branches in China, Denmark, Germany, India, Israel and Sweden.
Founders are warning that the bank’s failure could wipe out startups around the world without government intervention. SVB’s joint venture in China, SPD Silicon Valley Bank Co, was seeking to calm local clients overnight by reminding them that operations have been independent and stable.
“This crisis will start on Monday (today) and so we call on you to prevent it now,” UK startup founders and chief executive officers said in the letter to Hunt. The companies listed in the letter include Uncapped, Apian, Pockit and Pivotal Earth.
Hunt spoke with the governor of the Bank of England about the situation on Saturday morning, and the economic secretary to the Treasury was holding a roundtable with affected firms later in the day, the Treasury said.
Underscoring the challenge governments face in getting a handle of the full extent of the fallout: The UK Treasury has begun canvassing startups, asking how much they have on deposit, their approximate cash burn and their access to banking facilities at SVB and beyond, sources said.
Treasury declined to comment on the survey.
Founders were anxiously awaiting the outcome of the roundtable and any information about how their deposits at the bank would be handled.
Toby Mather, CEO of UK-based education software startup Lingumi, has 85% of his company’s cash in SVB.
He tried to transfer some of his accounts, but as of last Saturday, he wasn’t sure whether that worked.
“This is life or death for us,” he said.
“These things seemed so mundane before.” — Bloomberg
