Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
With SVB Now Done. What’s the Impact for Canadian Tech?
Betakit | | March 10, 2023
Image: Unsplash/Koen Emmers
With news breaking Friday that the SVB bank has been closed by regulators, which have taken control of its deposits. This dramatic and quick downfall for one of tech’s most prominent financial institutions is likely to have cascading effects across not only Silicon Valley but Canadian tech.
- Canadian startups that have their US banking with SVB, or ostensibly Canadian companies that are legally domiciled in the US for tax purposes and use SVB, will be impacted by the bank closure.
- Numerous Canadian startups used SVB for their US bank accounts. “They were much more reasonable on rates and faster to help them than Canadian banks in the USA,” the VC said.
- In Canada, SVB plays a different role, as it does not have a banking license and only provides venture debt locally. As such, unlike their American counterparts, Canadian-domiciled companies likely won’t have their funds with the bank.
- SVB’s downfall could also create a “credit crunch” here. The shutdown potentially eliminates one pool of capital Canadian startups have relied on during the downturn.
See: US Government Closes Signature Bank and Moves to Stop Potential Banking Crisis
- Mark McQueen, until recently the head of CIBC Innovation Banking:
“For the sector, the repercussions aren’t entirely knowable at this stage,” McQueen wrote. “Entrepreneurs will have a harder time raising debt, at least temporarily. LPs will frown, for sure, which could make it harder for VCs to raise their next fund. The risk managers at competing banks will conclude what they’ll conclude, but SVB will no longer be easily held out as a proof-point of the appeal of lending to the innovation economy, even if this crisis had nothing to do with the credit quality of SVB’s loan book.”
Continue to the full article --> here
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