“Silicon Valley Bank Collapse Could Devastate Tech Startup Ecosystem Worldwide”
The collapse of Silicon Valley Bank is having a devastating effect on tech startups around the world. The UK government has recognized the importance of tech sector companies and that they often rely on cash deposits to cover their day to day costs.[0] As a result, the UK Treasury is canvassing startups to find out how much they have on deposit, their approximate cash burn, and their access to banking facilities.[1]
Startup founders are panicking about accessing money and paying employees, leading to a letter sent to UK Chancellor Jeremy Hunt from the leaders of roughly 180 tech companies.[1] The letter implores Hunt to take action and prevent the crisis from unfolding on Monday. Hunt spoke with the governor of the Bank of England about the situation and the economic secretary to the Treasury was due to hold a roundtable with affected firms.[1]
In the UK, tech startup association Coadec has expressed concern over the potential impact of SVB’s collapse on the UK’s tech startup ecosystem. Alexander Fitzgerald, founder of broadband startup Cuckoo and a former Treasury official, noted that the finances of British startups are already stretched due to a slowdown in venture capital funding market, and he urged the Treasury to step in fast.[2]
In Canada, SVB Financial Group’s unit reported C$435 ($314 million) in secured loans last year.[1] Toronto-based advertising-tech firm AcuityAds Holdings Inc. revealed it had $55 million in deposits at SVB, amounting to more than 90% of its cash.[1]
A financial tech startup, Uncapped, announced the release of an emergency funding program to assist startups with meeting payroll and other obligations, as well as providing longer-term bridge loans to aid with working capital.[2]
The full extent of the fallout is yet to be seen, but it is clear that the collapse of Silicon Valley Bank could have a significant impact on the tech startup ecosystem around the world. The UK government and other affected countries must take action fast in order to prevent a full-blown economic crisis.
0. “Government to meet tech firms following collapse of Silicon Valley Bank UK” The Guardian, 11 Mar. 2023, https://www.theguardian.com/business/2023/mar/11/government-to-meet-tech-firms-following-collapse-of-silicon-valley-bank-uk
1. “SVB Fallout Spreads Around the World as UK Firms Plea for Help” Financial Post, 11 Mar. 2023, https://financialpost.com/pmn/business-pmn/svb-fallout-spreads-around-the-world-as-uk-firms-plea-for-help
2. “SVB Fallout Spreads Around the World as UK Firms Plead for Help” Yahoo News, 11 Mar. 2023, https://news.yahoo.com/svb-fallout-spreads-around-world-154331383.html
