(Bloomberg) — The fallout from the collapse of a Silicon Valley bank is beginning to ripple around the world.
Most Read from Bloomberg
SVB’s UK unit is set to be declared bankrupt, has already ceased trading and is no longer taking on new clients. Epidemic fears have also spread to Canada, where the bank’s loan book has doubled in the past year. Startup founders are nervous about accessing cash and paying employees. On Saturday, the heads of 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,” the letter, seen by Bloomberg, said. “Many businesses could be sent into involuntary liquidation overnight.”
England and Canada are just the beginning. SVB also has branches in China, Denmark, Germany, India, Israel and Sweden. Founders warn that a bank failure could destroy startups around the world without government intervention. SPD Silicon Valley Bank Co., SVB’s joint venture in China, tried to calm local customers overnight by reminding them that operations were independent and stable.
Read more: SVB’s collapse rooted in treasury races during pandemic
“This crisis starts on Monday, so we’re calling on you to stop it now,” UK startup founders and CEOs said in a letter to Hunt. Companies listed in the letter include Uncapped, Apion, Bagitt 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 will hold a roundtable with affected firms, the Treasury said.
Read more: SVB Rocks California founders join Napa vintners in fear
Underscoring the challenge governments face in dealing with the full scale of the downturn: the UK Treasury has begun canvassing startups, asking how much they have on deposit, their approximate cash burn and access to banking facilities at SVB and beyond. A person familiar with the matter said he asked not to be identified because the information is not public. The Treasury declined to comment on the survey.
Uncapped, a fintech startup that lends to other startups, said it will launch an emergency funding program to help companies meet payroll and other obligations, as well as provide long-term bridge loans to help with working capital.
Also Read: Silicon Valley Bank: Investor, Lender, Networker of Startups
UK Tech Startup Association Codec said on Twitter that “panic” was setting in as it became clear that SVB’s collapse could have a “significant impact on the UK’s tech startup ecosystem”. The committee said there was a “potential impact with the Treasury and No. 10” and that “work on policy options was ongoing overnight”.
Alexander Fitzgerald, founder of broadband startup Cuckoo and a former treasurer, noted that funding for British startups has already been stretched due to a slowdown in the venture capital funding market. “British startups need funding to move faster,” he said.
In Canada, SVB Financial Group’s unit secured C$435 million ($314 million) in secured debt last year, more than double the C$212 million a year earlier, regulatory filings show. According to the bank’s previous report, its clients include e-commerce software provider Shopify Inc. and pharmaceutical company HLS Therapeutics Inc.
Read more: SVB doubles its Canadian loan book in a year before collapsing
Toronto-based ad-tech company AcuityAds Holdings Inc. On Saturday it disclosed that it holds $55 million in deposits with SVB. The company halted trading in its shares on Friday after a 14% decline, citing an “unfolding situation” with the Silicon Valley bank.
(Updates with details on SVB’s businesses and depositors in Canada.)
Most read from Bloomberg Businessweek
©2023 Bloomberg LP
