The impact of the collapse of Silicon Valley banks spread globally and could set the tech ecosystem back 20 years

Focus:

• 1 Silicon Valley Bank has branches in many countries around the world, so the impact of the bank's collapse is spreading around the world.
• 2 Founders around the world worry that the collapse of Silicon Valley banks could lead to cash flow constraints or even bankruptcy for more startups.
• 3 A number of startups have said they can't pay their salaries and are trying various ways to raise funds, including emergency financing.

Tencent Technology News on March 12, the impact of the collapse of Silicon Valley banks is beginning to spread around the world. The bank, which has branches in the UK, Canada, Germany, India, Israel and elsewhere, fears that its collapse could lead to the bankruptcy of more startups around the world, setting back the tech ecosystem by 20 years.

Startup founders in California's San Francisco Bay Area are worried about not being able to withdraw money and pay employees, and that concern has spread to more countries.

In the UK, the Silicon Valley Bank subsidiary is about to declare bankruptcy and has stopped trading and is no longer accepting new customers to open accounts. On Saturday, local time, executives of about 180 technology companies sent a letter to British Chancellor of the Exchequer Jeremy Hunt, calling on him to intervene. "Losing significant deposits could erode the industry's potential and set the tech ecosystem back 20 years," the executives said in the letter. Many businesses will be on the verge of bankruptcy overnight. ”

And that's just the beginning. Silicon Valley Bank also has branches in China, Denmark, Germany, India, Israel and Sweden. The founders warned that without government intervention, the bank's collapse could lead to the bankruptcy of more startups around the world. SPD Silicon Valley Bank, a joint venture of Silicon Valley Bank in China, is trying to reassure local customers that the industry has always operated independently and remained stable.

In a letter to Prime Minister Hunt, UK startup founders and CEOs said: "This crisis will begin on Monday, so we call on you to intervene now. Prime Minister Hunt discussed the situation with the governor of the Bank of England on Saturday morning, and the chancellor also held a roundtable with affected companies later in the day, the Treasury said.

According to two people familiar with the matter, the Treasury has begun investigating startups, asking them about the amount of deposits they have in Silicon Valley banks, their approximate cash consumption and their use of Silicon Valley and other banking facilities, highlighting the challenges governments face in fully understanding the impact of the crisis.

The founders are anxiously awaiting the outcome of the roundtable and information on what their deposits in the bank will be handled. British educational software startup Lingumi holds 85 percent of its cash in Silicon Valley Bank, and its chief executive, Toby Mather, will try to transfer some of the money to his other account dealers. But as of Saturday night, he wasn't sure if that approach had worked. "In the past, it didn't matter where you made your money, but now it's a matter of life and death for the company," he said. ”

Jack O'Mila, founder of Ochre Bio, a London-based genomics startup, spent the weekend trying unsuccessfully to transfer deposits in Silicon Valley banks. "If the government doesn't intervene, it could really destroy an entire generation of startups," he said. ”

Like the U.S., Silicon Valley Bank deposits in the U.K. are insured, but it's unclear when those funds will be unlocked. Adding to the concerns of startup founders is that the collapse of Silicon Valley banks will stifle future flows of venture money into the UK, which is already suffering the negative impact of Brexit.

Asian tech leaders are also scrambling to assess the impact of potential Silicon Valley bank failures. In Singapore, financiers and entrepreneurs shared information at Shangri-La's Wharton alumni gathering. In India, startup founders and investors didn't even talk about anything else at a conference in Mumbai.

Chinese analysts say the impact of the Silicon Valley bank collapse on the tech sector should not be underestimated. Deposits are crucial for tech startups because they often require large amounts of cash to cover huge expenses, including R&D costs and employee salaries. "If these cash deposits are eventually impaired during bankruptcy or restructuring, some technology companies may be in a high degree of cash flow strain, even without ruling out the risk of bankruptcy," the analysts said. ”

Back in Silicon Valley, U.S. Congressman Roe Connor from Santa Clara held a town hall discussion late Friday that was attended by more than 600 people, including startup founders, tech leaders and Silicon Valley Bank employees. The event, which lasted two and a half hours, focused on which U.S. small businesses will pay their salaries on Monday.

On Friday, Silicon Valley Bank's customers in California, many of them startup founders, braved the cold and rain to stand outside the bank's famous Shashan Road branch in Silicon Valley, knocking on locked glass doors in an attempt to get representatives from the Federal Deposit Insurance Corporation (FDIC) to answer their questions.

The founder of a drone startup on site said her withdrawal on Thursday had not been completed and she was worried about not being able to pay her 12 full-time employees. She tried to call the FDIC several times, but no one answered.

Another customer commented that he should bring a bottle of whiskey to hand out to everyone while they wait. In an attempt to get more information from an FDIC representative, he called for "please put yourself in our shoes," but the FDIC representative closed the glass door again after apologizing.

Many in the venture capital and startup world are trying to find a temporary solution. Uncapped, a British fintech company that lends to other startups, said it was launching an emergency financing program to help businesses pay salaries and other payments, as well as raise liquidity needed to operate.

Alexander Fitzgerald, founder of broadband startup Cuckoo and former UK Treasury official, noted that the financial situation of UK startups is already stretched thin due to the slowdown in the venture capital funding market, and that "UK startups need rapid Treasury intervention".

In Canada, a Silicon Valley Bank subsidiary received $314 million in secured loans last year, double the year-ago period, regulatory filings showed. According to a previous statement from the bank, its customers include e-commerce software provider Shopify and pharmaceutical company HLS Therapeutics.

Toronto-based ad tech firm Acuity Ads Holdings revealed Saturday that it has $55 million in deposits in Silicon Valley banks, or more than 90 percent of its cash. On Friday, trading in the company's stock was suspended after plunging 14 percent due to the collapse of the Silicon Valley bank. (Golden Deer)