How Silicon Valley Bank's collapse ripped through global tech
People wait outside the Silicon Valley Bank headquarters in Santa Clara, California, U.S., March 13, 2023. /CFP
People wait outside the Silicon Valley Bank headquarters in Santa Clara, California, U.S., March 13, 2023. /CFP

People wait outside the Silicon Valley Bank headquarters in Santa Clara, California, U.S., March 13, 2023. /CFP

While the global effects of the collapse of Silicon Valley Bank (SVB) are just emerging, one thing is clear: tech startups, no matter how far apart, are intertwined. Many depend on a single mid-sized bank for their day-to-day operations.

Following the lead of California colleagues, startups in Europe and Asia gravitated to the bank, the 16th largest in the U.S. last year, whose name rang with tech cachet and which offered them specialized financial services.

Quincy Lee, founder of Seattle-based EV charging startup Electra Era, tried to move millions of dollars from SVB on Thursday afternoon as warning signs multiplied. The website was down, overwhelmed by traffic. A customer service agent told him by phone that there could be a delay because so many people were trying to withdraw. By Monday afternoon, he had succeeded in getting his money and was looking for an alternative bank. 

In the UK, Britain's Chancellor of the Exchequer Jeremy Hunt said the government and the Bank of England had facilitated a private sale of SVB's UK arm to HSBC, in a move which would protect deposits without taxpayer support.

European Union officials also assured consumers the bank had a "very limited presence" in the bloc. And Christoph Stresing, managing director of the German Startups Association, expressed cautious optimism that domestic companies would get off lightly.

However, European stocks fell on banking industry concerns, and even startups that did not bank with SVB were scrambling.

"It's hard to understand just how interconnected SVB is with the start-up ecosystem," said Rachael Crook, founder and CEO of London-based healthcare start-up Lifted. Over the weekend, she soothed investors and made sure crucial service suppliers would not be hobbled, after executives raised concerns a key financial partner may have money tied up with SVB.

Aleksandr Volodarsky, CEO of Ukrainian startup, which banks with SVB in the United States, said that he started discussing the collapse with other entrepreneurs in the region on Thursday.

"We initiated a wire transfer on Friday morning and still nothing happened," he said. "We were lucky because we just made payments to developers and engineers just two days earlier."

According to Garry Tan, president of the start-up accelerator Y Combinator, over 1,000 startups in his portfolio are impacted by the SVB collapse. The payroll-related furlough or shutdown will impact more than 10,000 small businesses and start-ups, which use SVB as their sole bank account.

He called on Congress to act more decisively to save the bank on Saturday. 

"We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy. We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank," wrote Y Combinator in an open petition signed by over 5,000 CEOs and founders representing over 400,000 employees.

Tan warned that the shockwave will impact the U.S. technology industry and "ultimately set back U.S. competitiveness by a decade or more."

(With input from agencies)

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