SVB fallout spreads around the world as UK firms call for help
(Bloomberg) – The aftermath of the collapse of the Silicon Valley bank is beginning to unfold around the world.
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The UK unit of SVB is on the verge of bankruptcy, has already ceased trading and is no longer taking on new customers. Startup founders are terrified of accessing money and paying employees. On Saturday, the leaders of some 180 tech companies sent a letter urging British 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, which was shown to Bloomberg, said. “Many companies are sent into involuntary liquidation overnight.”
Britain is just the beginning. SVB also had offices in Canada, China, Denmark, Germany, India, Israel and Sweden. Founders warn the bank’s collapse could wipe out startups around the world without government intervention. The SVB’s joint venture in China, SPD Silicon Valley Bank Co., tried overnight to reassure local customers by reminding them that operations had been independent and stable.
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“This crisis will start on Monday and that is why we are urging you to prevent it now,” British startup founders and chief executives said in the letter to Hunt. Companies listed in the letter include Uncapped, Apian, Pockit and Pivotal Earth.
Hunt spoke to the Bank of England governor about the situation on Saturday morning, and the Treasury’s business secretary is due to hold a roundtable with affected firms later in the day, the Treasury said.
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This underscores the challenge governments face to get to grips with the full extent of the fallout: The UK Treasury has started quizzing start-ups, asking how much they have on deposit, what their cash burn is and how much money they have how they have access to banking facilities at SVB and beyond, two people familiar with the matter said and asked not to be identified as the information is not public. The Treasury declined to comment on the survey.
Uncapped, a fintech startup that makes loans to other startups, is launching an emergency financing program to help companies meet payroll and other obligations, as well as longer-term bridging loans to support working capital.
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UK tech startup association Coadec said on Twitter that “panic” is setting in as it is clear that the collapse of SVB “could have a significant impact on the UK tech startup ecosystem”. The group said it engaged with “Treasury Department and No. 10 on the possible implications” and “worked on policy options overnight.”
Alexander Fitzgerald, founder of broadband startup Cuckoo and a former Treasury official, noted that UK startup finances are already stretched due to a slowdown in the venture capital funding market. “British startups need the Treasury to intervene quickly,” he said.
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