(Bloomberg) — Fallout from the Silicon Valley Bank collapse is beginning to reverberate around the world.
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SVB’s UK unit is about to be declared insolvent, has already gone out of business and is no longer taking on new customers. Contagion fears have also spread to Canada, where the bank’s loan portfolio has doubled in the past year. Startup founders are panicking about accessing money and paying employees. On Saturday, executives from around 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 companies will be sent into involuntary liquidation overnight.”
The UK and Canada are just the start. SVB also had branches in China, Denmark, Germany, India, Israel and Sweden. The founders warn 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., sought to calm local customers overnight by reminding them that operations were independent and stable.
Read more: SVB’s collapse was rooted in Treasury bets during the pandemic
“This crisis will start on Monday and so we call on you to stop it now,” the UK startup founders and CEOs said in the letter to Hunt. Companies listed in the letter include Uncapped, Apian, Pockit and Pivotal Earth.
Hunt spoke to the Governor of the Bank of England about the situation on Saturday morning, and the Treasury’s economic secretary was due to hold a roundtable with affected companies later in the day, the Treasury said.
Read more: SVB Rocks California as Founders Join Napa Vintners in Fear
Highlighting the challenge governments face in getting a handle on the scale of the fallout: the UK Treasury has started canvassing startups, asking how much they have on deposit, their approximate cash consumption and their access to SVB’s banking services and other Beyond that, two people familiar with the case said, asking not to be identified because the information is not public. The Treasury declined to comment on the investigation.
Uncapped, a financial technology startup that lends to other startups, said it was launching an emergency funding program to help companies meet salary and other obligations, as well as longer-term bridging loans for help with working capital.
Read more: Silicon Valley Bank: The Startup Investor, Lender, Networker
UK tech startup association Coadec said on Twitter that “panic” is setting in as it is clear the collapse of SVB “could have a significant impact on the UK tech startup ecosystem”. The group said it engaged with “Treasury and No. 10 on potential impact” and “work continued overnight on policy options.”
Alexander Fitzgerald, founder of broadband startup Cuckoo and a former Treasury official, noted that finances for UK startups are already stretched due to a downturn in the venture capital funding market. “UK startups need the Treasury to step in quickly,” he said.
In Canada, the country’s unit of SVB Financial Group reported CA$435 ($314 million) in secured loans last year, double the CA$212 million the previous year, the documents show. regulations. Its customers include e-commerce software provider Shopify Inc. and pharmaceutical company HLS Therapeutics Inc., according to an earlier statement from the bank.
Read more: SVB doubled its Canadian loan portfolio in the year before the collapse
Toronto-based ad tech company AcuityAds Holdings Inc. revealed on Saturday that it has $55 million in deposits with SVB, more than 90% of its cash. The company had halted trading in its shares on Friday after a 14% plunge, citing the “ongoing situation” with Silicon Valley Bank.
(Updates with details of SVB companies and depositors in Canada.)
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