How the bankruptcy of Silicon Valley Bank affected the global IT industry.
Entrepreneurs all across the world became aware of the situation shortly after companies in California began withdrawing funds from the shaky Silicon Valley Bank.
“About 90% of our capital was in SVB,” said Sam Franklin, 28, a London-based chief executive whose recruiting business Otta specialised in digital skills. He gave up doing “life admin” on the weekends to figure out how to pay his staff at the end of the month.
Florian Simmendinger, co-founder and CEO of the wearables business Soundbrenner in Hong Kong, missed the beginning of the panic over SVB Financial Group last week in California, but he swiftly caught on.
“What, what, what? Are you serious? such as my bank? “asked he. “We already lost the ability to access our account during regular business hours.”
One thing is certain, even though the worldwide ramifications of Silicon Valley Bank’s failure are just now becoming apparent: tech firms, no matter how dispersed, are interconnected. Many rely on one mid-sized bank for all of their daily needs.
Startups in Europe and Asia were attracted towards the bank, which was the 16th largest in the US last year, since its brand had tech cachet and it gave them specialized financial services, following the example of their Californian counterparts.
US founders cautious
On Thursday afternoon, as warning indicators mounted, Quincy Lee, the founder of Seattle-based EV charging business Electra Era, attempted to withdraw millions of dollars from Silicon Valley Bank.
Due to excessive load, the website was unavailable. Because so many individuals were attempting to withdraw, a customer support representative informed him that there would be a wait. He was seeking another bank by Monday afternoon after obtaining his money.
US authorities revealed an emergency funding plan that offered the bank’s clients access to all of their deposits after a weekend of heated debates about the future of SVB.
In the UK, the government and the Bank of England enabled a private sale of SVB’s UK business to HSBC, a move that would secure depositors without requiring taxpayer backing, according to Chancellor of the Exchequer Jeremy Hunt.
Consumers were also reassured by European Union officials that the bank had a “very minimal presence” there. The managing director of the German Startups Association, Christoph Stresing, also voiced cautious hope that domestic businesses would avoid major problems.
Nevertheless, worries about the banking sector caused European markets to decline, and even companies that did not bank with SVB were in a panic.
Rachael Crook, founder, and CEO of London-based healthcare start-up Lifted, remarked that it was difficult to comprehend how how linked SVB was with the start-up ecosystem. Although executives expressed fears that a significant financial partner may have money tied up with SVB, she calmed investors over the weekend and ensured that essential service providers wouldn’t be hindered.
Aleksandr Volodarsky, the CEO of the Ukrainian firm lemon.io, which banks with SVB in the US, told Reuters that he began talking to other local businesspeople on Thursday about the collapse.
On Friday morning, we started a wire transfer, but nothing has happened yet, he claimed. We were fortunate since only two days prior, we had paid developers and engineers.
“If you have a lot of money, you should distribute it around,” has been a major lesson for many of us in our sector.”