Silicon Valley Bank collapsed on Friday due to “inadequate liquidity and insolvency”.
The collapse of the foremost American bank had far-reaching effects on American and African startups.
“As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined,” the Federal Deposit Insurance Corporation which led the closure of the bank stated.
The 40-year-old financial institution caters to the tech industry and that was the 16th largest bank in the US.
“30% of Y Combinator companies exposed through SVB can’t make payroll in the next 30 days,” YC’s president, Garry Tan, tweeted, highlighting the effect of the collapse on the tech industry.
Chipper Cash, in 2021 received a $100 million investment which was led by SVB.
Other investors who participated in this round include existing investors — Deciens Capital, Ribbit Capital, Bezos Expeditions, One Way Ventures, 500 Startups, Tribe Capital and Brue2 Ventures.
“This past week has been one of the most chaotic and unraveling for the US technology and startup community. In the wake of both Silvergate Bank and Silicon Valley Bank (SVB) being shut down within a few days of each other, I wanted to come out and share a few thoughts. The most important of which is to clearly state that fortunately Chipper Cash has had overall insignificant exposure to both these events.,” the blogspot which was authored by Chipper Cash’s CEO, Ham Serunjogi began.
“We had a very limited amount of money (only about $1 million) held in our SVB account at the time the bank was taken over by the California regulator,”
“SVB made their investment in Chipper in 2021 and we received those funds as soon as that round closed…and SVB owns a very small part of Chipper; [about] 2%.” He maintained.
However, Chipper says it’s amongst the depositors in SVB that receive their funds from FDIC on Monday.
Chipper Cash is the only African startup that has admitted it has funds with SVB.
Nigeria-based startups, Risevest and Vesti disclose they are not connected to the California-based bank.
Founded in 2018 by Ham Serunjogi and Maijid Moujaled, Chipper Cash which offers a free peer-to-peer cross-border payment services in Africa through it’s app has laid off it’s staff on two occasions, first when it was hit by the FTX collapse and this year over economic downturn.
The fintech operates in seven African countries—Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya.
Experts in the tech industry believe that the collapse of the tech bank would have a negative effect on the African tech ecosystem.
“SVB was well known for treating our startups with respect unlike a lot of the big banks which tended to be less receptive to banking relationships with African startups
“I am worried that not only is there significant exposure to SVB in the community but that the ‘flight to safety’ will actually force a lot of startups to take their money to other banks that may also struggle. At the end of the day given the situation right now safety means a top 5 banking relationship. Which many of our startups do not have.” Iyinoluwa Aboyeji, CEO of Future Africa, said in a conversation with The PUNCH
Y Combinator stated that one-third of the startups under them used SVB as their sole bank account.
It said the collapse will affect startups and may lead to the loss of 100,000 jobs in the US.
There are calls for the US to bail out the bank, but US Treasury Secretary, Janet Yellen, disclosed on Sunday that she was working closely with regulators to respond to the collapse of SVB and protect depositors, although the possibility of bailout might be bleak.
