The closure of the United States-based Silicon Valley Bank, the bank of choice for many venture capitalists and startups, may affect Nigerian startups according to industry players.
On Wednesday, March 8, SVB surprised investors with news that it was seeking to raise $2.25bn to maintain liquidity. Within the next couple of hours, a bank run occurred after VCs advised their startups to withdraw their funds from SVB.
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By Thursday, customers had withdrawn $42bn of deposits, according to a California regulatory filing. The filing revealed that as of the close of business on March 9, the bank had a negative cash balance of approximately $958m.
On Friday, the US Federal Deposit Insurance Corporation closed the bank and seized its deposits, becoming the largest US banking failure since the 2008 financial crisis in the process.
The UK branch of SVB has also been closed down by the Bank of England after it sought £1.8bn of liquidity from it. The collapse of SVB has caused a collapse in the tech ecosystem because of the important role the US plays in the global tech ecosystem.
Many reports have estimated that the closure of the UK arm of SVB could affect as much as 30 per cent of UK tech startups and jeopardise about 10 per cent.
Prior to now, SVB had about $175.4bn in total deposits as of December 2022.
According to Y-Combinator’s president, Garry Tan, 30 per cent of YC companies are exposed as a result of the collapse and might not make payroll this month.
He tweeted, “30 per cent of YC companies exposed through SVB can’t make payroll in the next 30 days.”
There are over 80 African startups in Y-Combinator. One of the founders recently tweeted, “All the startup founders groups I’m in are in full-on panic mode. Everyone is moving money around. Nobody knows which banks are safe.”
Chipper Cash, on Sunday, disclosed in a statement that about $1m of its funds is trapped in SVB. The fintech, which is one of Africa’s most valuable startups, said SVB was one of its investors and led its Series C fund raise.
Punch
