The UK startup ecosystem is under severe stress today following the collapse of a Silicon Valley bank, which has stopped scores of startups from accessing cash to pay staff.
The Bank of England announced today that the UK branch of the Silicon Valley bank is set to enter bankruptcy tomorrow afternoon following the demise of its US parent.
The bank said eligible depositors would only be paid up to a protected limit of £85,000, or £170,000 for joint accounts, under the Financial Services Compensation Scheme, with the remaining assets owned by SVB being distributed by liquidators. Duration.
The move means that many tech firms with large deposits with SVB could be locked out of their accounts, leaving them without access to cash needed for employee payroll.
Matt Clifford, co-founder of venture capital business Entrepreneur First, said: “[The] The most common phrase in my inbox right now is ‘we can’t make payroll with insured’.”
He told the Standard: “The fundamental question is what happens to those people who can’t access the money they need. A bunch of them won’t make payroll and a bunch of them will go down.
“The UK Government wants the UK to be one of the world’s great tech ecosystems. first priority [is] Making sure thousands of UK startups make payroll this month,” he said.
“If depositors can’t access the money, the startup ecosystem is dead.”
Those who have been able to withdraw funds have poured cash into other London-based fintechs such as Revolut and Wise. Revolut reported that standard inbound volumes from Silicon Valley banks were almost 16.6 times higher than normal on Thursday, while Friday’s transfers may have been higher still.
Fred Destin, founder of London-based venture capital firm Stride, said: “Many startups have had trouble building banking relationships … If you’re a startup you may have all your cash in SVB.”
Seb Wallace, a venture capital investor at Triple Point, said: “It [collapse] A prudent cash management approach has hit home and firms now have a clear need for multiple bank accounts to spread risk.
More than 100 UK tech firms have signed a petition to Chancellor Jeremy Hunt, urging him to act faster to prevent startups from failing.
In the letter, they write: “The recent news about SVB going into bankruptcy represents a potential threat to the UK tech sector. Most of the most exciting and dynamic tech businesses with SVB are banks and where their deposits are held.” Amount has no or limited variety This weekend as tech founders most of us are running the numbers to see if we are potentially technically bankrupt.
“The impact of this goes far beyond our individual businesses. The Bank of England’s assessment that SVB going into bankruptcy would have a limited impact on the UK economy demonstrates an alarming lack of understanding of the sector and its role in the wider economy.” It is, today and in the future as well.”
“Jeremy Hunt plans to give a speech on how to develop the UK tech ecosystem to compete with Silicon Valley,” Clifford said.
“For this to be credible we need to see the current generation of startups by the end of the month.”