(Bloomberg) — The fallout from the collapse of Silicon Valley Bank is beginning to spread around the world.
Most read from Bloomberg
The British part of SVB is about to be declared bankrupt, has already stopped trading and is no longer taking on new clients. Startup founders are panicking about access to money and paying employees. On Saturday, the leaders of about 180 tech companies sent a letter calling on British Chancellor Jeremy Hunt to intervene.
“The loss of deposits has the potential to cripple the industry and set the ecosystem back 20 years,” they said in the letter that Bloomberg reviewed. “Many companies will be sent into involuntary liquidation overnight.”
The UK is just the beginning. SVB also had offices in Canada, China, Denmark, Germany, India, Israel and Sweden. Founders warn the bank’s bankruptcy could wipe out startups around the world without government intervention. SVB’s joint venture in China, SPD Silicon Valley Bank Co., tried to calm local customers overnight by reminding them that operations have been independent and stable.
Read more: SVB’s collapse was rooted in treasury betting amid pandemic (1)
“This crisis starts on Monday and so we are calling on you to prevent it now,” the founders and CEOs of British startups said in the letter to Hunt. The companies named in the letter include Uncapped, Apian, Pockit, 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 was due to hold a roundtable with affected companies later in the day, the Treasury said.
Read more: SVB Rocks California as Founders Join Napa Vintners in Fear (1)
The challenge governments face in managing the full magnitude of the impact is underlined: the UK Treasury has begun recruiting startups, asking how much they have on deposit, their estimated cash burn and their access to banking facilities at SVB and beyond, two said people familiar with the matter asked not to be identified because the information is not public. The Treasury Department declined to comment on the investigation.
Uncapped, a financial tech startup that lends money to other startups, said it is launching an emergency financing program to help companies meet their payroll and other obligations, as well as longer-term bridging loans to help with working capital.
Read more: Silicon Valley Bank: the investor, lender, networker of startups
UK tech startup association Coadec said on Twitter that “panic” is brewing as it is clear SVB’s collapse could have “a significant impact on the UK tech startup ecosystem”. The group said it has been in discussions with “Treasury and No. 10 about the potential impact” and “work has been done overnight on policy options.”
Alexander Fitzgerald, founder of broadband startup Cuckoo and a former Treasury official, noted that the finances of UK startups are already under pressure from a slowdown in the venture capital funding market. “British startups need the treasury to act quickly,” he said.
Most read from Bloomberg Businessweek
©2023 Bloomberg LP
Leave a Reply