Silicon Valley Bank’s swift and sudden collapse made waves far beyond the US as tech firms in China scrambled to park their money with other lenders.
Chinese startups have long relied on SVB, which has forged ties with local government officials in Shanghai, for enterprise capital funds after traditional US banks turned them away.
The Chinese government exerts strict controls over its currency and imposes restrictions on foreign investments — making SVB one in all the few lenders willing to work with China-based startups searching for capital from offshore investors.
“Silicon Valley Bank has played an instrumental role for us,” Guanchun Wang, founding father of Laiye, a Beijing-based tech startup, told the Information.
“We opened our first checking account with them when the likes of Citi wouldn’t have anything to do with us.”
SVB’s collapse “could make it harder for Chinese startups to boost money from U.S. investors — not less than within the short run,” Wang said.
Since its founding in 2015, Laiye has raised $211 million. The corporate said that lately, it needed to shift most of its US dollar holdings to Citi.
In 2012, SVB partnered with Shanghai Pudong Development Bank to form SPD Silicon Valley Bank Co., which provides VC funds to tech startups.
Before SVB was shut down by US regulators on Friday, Shanghai Pudong Development told its clients that the California-based lender’s operations and liquidity remained healthy, in response to Bloomberg News.
Michael Wang, co-founder of a Chinese automation software startup in Hangzhou, told the Information that he was urged by enterprise capital firms to instantly pull his money from SVB accounts — hours before the bank collapsed.
“You can’t wait. No person knows how big the chance is,” he said.
Even before the SVB crisis, the Chinese tech sector has had trouble raising capital within the US because of heightened geopolitical tensions in addition to China’s economic problems.
The bank’s collapse sparked fears within the US of contagion within the banking sector.
SVB’s funds went south at warp speed after it disclosed a $1.8 billion loss on its bond holdings this week.
Shares of Chinese tech giants including Alibaba and Tencent Holdings were trading lower on Friday.
Shanghai Pudong fell by 1.7% in trading on Friday — its biggest decline since October.
