The Collapse of Silicon Valley Bank: An impact on Global Tech.

The Collapse of Silicon Valley Bank: An impact on Global Tech.

Entrepreneurs from the other parts of the world are astonished to hear that California startups started withdrawing their money from the troubled Silicon ValleyBank.

Sam Franklin, 28 year old London based chief executive of Otta, a recruitment firm that specialises in tech talent said that around 90% of their cash was in SVB and that he is worried of paying his employees at the end of the month.

In Hong Kong the co-founder and CEO of Hong Kong wearable company Soundbrenner Florian Simmendinger was about to panic after realising that he was not able to Login into his account during the regular business hours.

After the collapse of Silicon Valley Bank it has been realised that the tech startups prefer single mid-sized banks for their day-to-day operations.

Following the lead of California colleagues, many startups in Europe and Asia inclined towards the banking industry. It was the 16th largest in the U.S. last year, whose name was famous among tech cachet and which offered them specialised financial services.

As soon as the warning signs for Silicon Valley bank multiplied Quincy Lee, founder of Seattle-based EV charging startup Electra Era, tried to move millions of dollars on Thursday afternoon.
Due to huge traffic on the website for money withdrawal the website was down as confirmed by the customer service agent. Quincy was able to get his money on Monday afternoon and now he was in search of an alternative bank.

After a serious discussion over the weekend of the future of SVG, the U.S. regulators created an emergency funding plan wherein the customers were given access to all their bank deposits.
According to Britain’s Chancellor of the Exchequer of the UK Jeremy Hunt, the Government and the Bank of England had facilitated the sale of the UK arm of SVB to HSBC that would save deposits without the taxpayer support.

As per European Union officials the customers should be assured as the bank had “very limited presence” in the bloc. Managing Director of the German Startups Association, Christoph Stresing, expressed an optimistic view that the domestic companies would get off lightly.

The fall of European stocks of the banking industry raises concerns of even the startups that have not banked with SVB.

Rachael Crook, founder and CEO of London-based healthcare start-up Lifted said that it is hard for them to understand how SVB is so connected with the whole startup ecosystem. The customers were assured that the crucial service suppliers would not be hobbled after the executives raised concerns to a key financial partner with SVB.

The CEO of Ukrainian startup Aleksandr Volodarsky banked with SVB and he started discussing the bank collapse among other entrepreneurs of the region on Thursday.
He had initiated a wire transfer on Friday morning but nothing happened but he said he was lucky as the payments to developers and engineers two days earlier.

Chinese startups are moving money

SVB’s Shanghai-based joint venture, SPD Silicon Valley Bank (SSVB), had mentioned that it had a decent corporate structure and it had a separate balance sheet from the SVB. SSVB is China’s first Sino-U.S. joint venture bank with the first in technology and innovation bank.

SVB was among the few banks that made banking easy for the startups for dollar financing and was the dominant foreign bank for companies that were in its early stage. Currently many Chinese startups and fund managers are moving out their money from the SVB’s U.S. arm.

One lawyer for a China-based venture capital firm had all of its portfolio companies’ operating cash, as well as its own operating cash, stored with SVB, and now he spent the weekend strategizing on alternatives.

After a rollercoaster weekend, Otta CEO Franklin said his company would continue banking with the UK arm of SVB and add accounts at more banks.

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