SVB’s UK unit is set to be declared insolvent, has already ceased trading and is no longer taking new customers. Startup founders are panicking about accessing money and paying employees. On Saturday, the leaders of roughly 180 tech companies sent a letter calling on UK Chancellor Jeremy Hunt to intervene.
“The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” they said in the letter seen by Bloomberg. “Many businesses will be sent into involuntary liquidation overnight.”
The UK is just the beginning. SVB had branches in Canada, China, Denmark, Germany, India, Israel and Sweden, too. Founders are warning that the bank’s failure could wipe out startups around the world without government intervention. SVB’s joint venture in China, SPD Silicon Valley Bank Co., was seeking to calm local clients overnight by reminding them that operations have been independent and stable.
“This crisis will start on Monday and so we call on you to prevent it now,” UK startup founders and chief executive officers said in the letter to Hunt. The companies listed in the letter include Uncapped, Apian, Pockit and Pivotal Earth.
Hunt spoke with the governor of the Bank of England about the situation on Saturday morning, and the economic secretary to the Treasury was due to hold a roundtable with affected firms later in the day, the Treasury said.
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Underscoring the challenge governments face in getting a handle of the full extent of the fallout: The UK Treasury has begun canvassing startups, asking how much they have on deposit, their approximate cash burn, and their access to banking facilities at SVB and beyond, two people familiar with the matter said, asking not to be identified because the information isn’t public. Treasury declined to comment on the survey. Uncapped, a financial tech startup that lends to other startups, said it’s launching an emergency funding program to help companies meet payroll and other obligations, as well as longer-term bridge loans to help with working capital.
UK tech startup association Coadec said on Twitter that “panic” is setting in as it is clear SVB’s collapse “could have a significant impact on the UK’s tech startup ecosystem.” The group said it has been in engaging with “Treasury and No. 10 about the potential impact” and “work has been going on overnight on policy options.”
Alexander Fitzgerald, founder of broadband startup Cuckoo and a former Treasury official, noted that the finances of British startups are already stretched due to a slowdown in venture capital funding market. “British startups need the Treasury to step in fast,” he said.