The collapse of Silicon Valley Bank has sent shockwaves across the globe. But for now, many of its international partners’ clients have remained relatively insulated from the worst of the crisis.
Outside of North America, the bank had operations across Europe and Asia with clients across most global startup ecosystems. While small, international exposure to SVB was not insignificant. In 2022, 18% of deposits—about $31.1 billion—came from international clients, which represented 3% of total client funds.
But the impact goes beyond international clients and their deposits. SVB’s collapse has had a knock-on effect in international markets, impacted the reputation of SVB’s international partners and brought uncertainty for its overseas employees.
Europe
European banking stocks have been sinking in the last few days following the news of SVB’s collapse. The bank’s presence in Europe was mainly concentrated in the UK, where its London-based subsidiary, Silicon Valley Bank UK, was established in 2012. Not long after the collapse, the subsidiary was subject to a hurried takeover by HSBC that was brokered by the government to avoid a massive fallout for UK startups.
In mainland Europe, the impact has been far less than in the UK. SVB did not have a banking license for its branches in Denmark or Sweden, while its German office did not offer a deposit business.
“For a lot of European startups, SVB isn’t the first bank they think of,” said Quentin Nickmans, founder and managing partner of venture builder Hexa. “It might take a bit longer for companies raising capital from US investors to have their cheques cleared, but there isn’t the critical dependency on the bank in terms of payroll and other things like there is in the US.”
He added that there may be some issues for startups that originated in Europe and then moved over to the US, but their product or R&D subsidiaries based in Europe are likely to have a domestic banking partner.
Europe may see more of an impact on the venture debt front. SVB was a significant player, backing startups including data processing company Celonis and travel booking platform GetYourGuide. For now, startups are unable to access funds that have not yet been drawn down, putting many in uncertain positions.
Middle East
Outside of the US and the UK, SVB’s collapse was perhaps most felt in Israel, where the majority of the country’s startups were clients of the bank. Many of Israel’s VC-backed companies have been transferring money out of the country in recent months in the wake of the judicial reform controversy—a significant portion of which is likely to have landed with SVB.
Over the weekend, Israeli Prime Minister Benjamin Netanyahu said that the government was ready to take steps to assist startups with cash-flow issues, a move that OurCrowd CEO and founder Jon Medved believes is unlikely.
“We were lucky being a highly networked ecosystem that when the wildness started to happen, the entire country was moving in lockstep to get their assets out,” Medved said. “I think we’re over the worst of it now, and there are plenty of banks out there that are anxious to get new business. I don’t think that Israeli startups are going to find it harder to get loans or find new banks, and I would still recommend going to the US. But there will be longer-term effects. There will be greater attention given to treasury matters and risk management on the part of venture investors and startups.”
Asia
Prior to its collapse, SVB was active in China. The bank had set up a 50-50 joint venture, SPD Silicon Valley Bank, with local partner Shanghai Pudong Development Bank. In a statement, the business said that it has a separate corporate governance structure and independent balance sheet from its US counterpart. There have since been reports that Shanghai Pudong is looking to buy SVB’s share in the venture.
The situation is different in India, where SVB has significant operations. The bank’s India arm reportedly has around 800 staff who now face an uncertain future. SVB’s services were also popular with Indian startups, many of which still have funds trapped in their US accounts.
This has had an impact on the wider Indian economy, with the Indian rupee logging its worst day in five weeks on Tuesday.
VCs in the broader Asia region seem to have been impacted minimally. In a blog post from earlier this week, Vinnie Lauria, founding partner at Singapore-based Golden Gate Ventures, noted that a number of VC firms in the region—including his own—are clients of SVB but typically hold minimal funds with the banks. GGV’s exposure was less than 1% of its total funds. Regardless, Lauria noted that startups in the region should still brace themselves.
“If you’re a startup here in Southeast Asia with no SVB account, it is prudent to be aware that you will feel the effects of this situation in the next few months—if not tomorrow,” he said.
Africa
The potential impact of SVB’s failure is likely to be felt the least in Africa, where the bank had less of a presence.
“In our experience, we had difficulty getting SVB deposit accounts opened for our African founders,” Techstars CEO Maëlle Gavet said. “There is a difference between African and Indian startups in this regard, with respect to their efforts to flip to US or Canadian legal entities. Indian companies became SVB clients easily, whereas African startups found SVB difficult to bank with. In our discussions with African founders from different Techstars programs, the topic of the SVB collapse has not been a big one.”
Gavet added that African startups are more comfortable with digital banking and money products, so neobanks such as Mercury and Brex are the go-tos over institutions like SVB. With Africa’s venture ecosystem still in its infancy, venture debt provisions are already low, so SVB’s loss as a lender is not expected to be significant for the region’s startups.
Featured image by Aleksandra Pikalova/Shutterstock
