The impact of Silicon Valley Bank has begun to spread across the globe. From tech startups to small wineries all have been impacted by the crisis. It's not just the startups, it's also the markets across the globe that took a hit after the bank's parent company decided to sell off some securities from its portfolio on Wednesday.
California startup founders are worried they may not be able to access their money and pay employees, while other countries like India, China and Canada are worried about the impact on the market and the economy at large. The SVB unit in the UK is set to be declared insolvent and has already stopped trading or taking new customers. Additionally SVB branches in India, Denmark, China, Germany, Sweden and Israel could also impact the countries.
The start ups that wrote to UK Chancellor Jeremy Hunt on Saturday fear that this may have the potential to cripple sectors and also pull back the ecosystem by 20 years. Many founders also feel that if the government doesn't intervene then the crisis will probably wipe out many startups across the world. As deposits are crucial for tech startups to payout salary and other expenditures like research and development, the impacts on them can be worse as they may not be able to access the money stored in the bank.
The founder strongly believes that the main crisis will start on Monday when the companies will not be able to access their funds.
As per a report by Bloomberg the UK Treasury has already begun talking to the founders after the founders wrote the letter and started asking how much money they have on deposit and if they have access to banking facilities at SVB.
Talking to Bloomberg Toby Mather, CEO of UK-based education software startup Lingumi said that they have 85 per cent of his company's cash in the bank and when he tried to transfer funds but as of Saturday evening he was not sure if the transfer would work. He claimed that this is a life or death situation for them.
Additionally some of the SVB deposits were insured but the details on when the funds would be available is yet to be clarified.
Another major fear in the country is that this could impact possible future funding from venture capitals, especially since many businesses are still in a mess because of Brexit.
It's not just the tech companies that have been affected. Even small vintners will be affected considering the interests have gone up and one of the most important lenders has been put in its insolvency procedure.
Every tech leader and start up founder has been scrambling to assess the ramifications and the possible solutions.
In China the banks joint venture SPD Silicon Valley Bank Co, was trying to calm down local clients by reminding them that their operations were independent of SVB and stable.
Analysts in China as reported by Bloomberg feel that if cash deposits have to be impaired through bankruptcy or restructuring then many tech startups will face high cash flow tension. The risk for bankruptcy would also be increased.
On one Side Silicon Valley, US Congressman RO Khanna from Santa Clara held a meeting to discuss the problems of small businesses, on the other many founders on Friday stood outside the Silicon Valley office in California trying to get in touch with the Federal Deposit Insurance Corporation to answer their questions, but they got none.
A drone startup founder while speaking to Bloomberg said that she had tried calling the FDIC multiple times but couldn't get across as they didn't answer. Other customers asked the FDIC representatives to put themselves in their shoes when they just apologized and closed the glass door again.
US customers with less than $250,000 in the bank may be able to count on insurance provided by the Federal Deposit Insurance Corp, reported AP.
The SVB Financial Group in Canada reported $314 million in secured loans last year, which according to regulatory filings is twice the loans secured the year earlier. The bank's customer list in the country include pharmaceutical company HLS Therapeutics Inc. and e-commerce provider Shopify Inc.
AcuityAds Holdings Inc. which is an advertising-tech firm revealed that it had $55 million in deposits at SVB which totals to more than 90 per cent of its cash. The firm had stopped trading its stocks on Friday after it saw a 14 per cent slump in shares due to the situation in SVB.
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