[ad_1]
By Thursday night and Friday morning, the fallout from the closure of Silicon Valley Bank in the US had reached shores in the UK and Europe. Yesterday afternoon, the Bank of England applied for a court order to put Silicon Valley Bank UK Ltd – the UK arm of the US institution – into insolvency proceedings.
In a statement, it said: “SVB UK has limited presence in the UK and does not have significant operations that support the financial system. Temporarily, the company will stop making payments or accepting deposits. SVB UK has confirmed it will go into insolvency from this Sunday night (tomorrow).
The move could affect up to 30% of UK tech startups, compared to 10%, industry sources estimate.
As of today TechCrunch, with the help of industry body Coadec, a group of UK entrepreneurs and investors are now making a hasty representation to HM Treasury this weekend due to the closure of SVB UK.
Additionally, the group of VCs released the following statement, which reads: “SVB-UK is a trusted and valued partner to the full innovation ecosystem of powerhouse innovators and the venture capital industry. It plays a vital role in supporting and funding UK start-ups. If SVP-Uk were to be acquired and capitalized properly, we would strongly encourage our portfolio companies to continue their banking relationship with them.
SVB scandal startup investors joint statement 2023
The UK Prime Minister’s Office is understood to be working over the weekend to assess the impact of Number 10 Downing Street on the tech industry.
Separately, some 210 (and counting) UK tech CEOs and founders (employing around 10,000 people) have written to the Chancellor about the issue.
And Saber Development, Sky News reports that The Bank of London (TBL) (Tara Bank) is said to be considering a rescue bid for SVB UK.
The collapse of the US bank came after it tried to raise $2.25 billion to offset losses from the sale of US government bonds, with shares plunging 60% as customers and investors scrambled in droves to empty their accounts. .
As of Friday morning, there was no clear threat to UK operations from the fallout that was taking place in the US. SVB UK was legally and operationally independent from the US arm. (SVB UK obtained a UK banking license in 2012 but became a UK Standalone Bank in August 2022 and has 700 full-time staff).
In addition – After the 2008 financial crisis – all UK banks were required by law to separate their core retail banking services from their investment and international banking activities under a so-called “ring-hedge”.
However, on Friday morning, the Financial Times reported that SVB UK had sought £1.8bn of liquidity through the BoE’s discount window facility, which it could provide to the bank for emergency funding.
Also on Friday, Erin Platts, chief executive of SVB UK, joined hundreds of UK investors and founders in a call to emphasize that the UK bank’s depository system is separate from its US counterpart.
Platt’s pleas, however, have not stopped the shock of events in the US from spreading among UK VCs and tech founders.
Following the US news, word spread like wildfire on UK tech WhatsApp groups as SVB UK account holders moved to withdraw their funds from Thursday evening.
Hours after Platt’s call, the BoE moved in to shut down the bank’s operations.
While some investors TechCrunch spoke to told their portfolio companies to “diversify” the number of bank accounts their businesses use, it was clear by Friday afternoon that most companies had simply “opted out” of SVB. UK
Hussain Kanji, co-founder of Hoxton Ventures (which has raised a total of $355 million in three funds) tweeted that he advised portfolio companies to pull their money out of SVB “because it’s banking.” US VC Mark Suster echoed Kanji’s points about how panic among VCs fueled the SVB crisis (and alluded to the Streisand Effect). He tweeted.“Law firms and other VCs panicked. There was no crisis before.
On Friday afternoon, Luxembourg-based Mangrove Capital Partners CEO Marc Tlusz (which has raised a total of $819.2m across five funds) said: He tweeted.: “If you don’t advise your companies to spend the money, you’re not doing your job as a board member or shareholder. Life in startups is very risky, don’t gamble with your lifeline…”
Under UK bankruptcy law, depositors are eligible for compensation of up to £85,000 ($102,000) for lost deposits. But, of course, hundreds of millions of pounds are held on SVB UK’s balance sheet from UK founders and investors. Additionally, TechCrunch reports that SVB UK is widely used as a payroll service by many startups in the US.
Start the fall
The situation could have a huge impact on the UK startup industry.
Matthew Clifford, Founder of First Entrepreneur; He tweeted. There could be 300 UK start-ups struggling to make ends meet next week.
On Friday, TechCrunch learned that several VC firms in Europe have told LPs not to send money through SVB UK.
And in the last 24 hours, HM Treasury has sent around a memo to be circulated to tech companies asking about SVB UK deposit rates, their cash burn and whether they can only access SVB UK or other UK banking services. Facilities.
As the shock (there’s no other way to describe it) spreads through the UK and European tech startup community, TechCrunch has learned that several startups still have millions of pounds locked up in SVB UK. As of Friday, many have found they can withdraw some of their money from banks before the BoE closes the facility. And Silicon Valley Bank’s famously old-fashioned and clunky online banking platform didn’t help.
TechCrunch has been following the chatter among UK tech entrepreneurs, many of whom are finding it ironic that they are now in WhatsApp groups where some entrepreneurs have been able to withdraw money from SVB UK, giving it a run on the bank, while others are not slow to move. .
The symbiotic and perhaps too close relationship with the tech ecosystem represented by SVB UK was not lost on some viewers.
One entrepreneur I spoke to said I didn’t notice his words.
“It’s completely messed up. Yesterday some founders were like ‘Holy fuck, we’ve got £900k in the bank’. And the thing is, SVB mandates that if you have a venture debt loan, you primarily bank with them. It’s like a mafia, like a defensive ring.
Political failure
Opposition MPs are already weighing in, along with Shadow Chancellor Rachel Reeves. Commenting on Twitter:
“This will be a serious concern for many companies in our country, including start-ups. The Chancellor must urgently assess the extent of the risks to UK companies from the failure of the SVB and work with companies to manage those risks.”
and Labor MP Darren Jones TweetingA small banking crisis in the United States, the government may decide, is only the free market that has resulted in British businesses and redundant tech workers. Or the Prime Minister could take Britain seriously as a science and technology superpower.
High stakes
Encourage them to open SVB UK bank accounts to get funding backed by more VCs, many UK startups now find themselves in a difficult situation, their bank accounts are now unheated and inaccessible. If the BoE chooses to allow SVB UK to fail, it could create a huge long-term funding gap for years to come.
The events could not have come at a more critical time for the Conservative-led UK government’s bid for Brexit and the EU’s Horizon 2030 program as it tries to reassert itself as a European tech giant. A recent announcement by the Department for Science, Innovation and Technology may not be enough, with 30% of UK tech startups disappearing.
[ad_2]
Source link
