The collapse of Silicon Valley Bank (SVB) in the US eliminates a significant source of funding for Irish tech startups, but the direct impact on firms here will be limited, according to one industry leader.
What I would say in terms of impact is that it is not ideal for funding options for Irish startups to be reducing further, and the loss of an investor is never a good day for the ecosystem,” said Sarah-Jane Larkin, chief executive of the Irish Venture Capital Association.
“We are very limited in this country in terms of additional private sources of capital to match state investment in VC funds.”
The view comes after Californian regulators stepped in on Friday to shut down Silicon Valley Bank after a run on its deposits.
SVB has been a funder of the Irish tech scene since 2012 and has committed hundreds of millions in funding since then in a partnership with the Irish Strategic Investment Fund (Isif).
“Obviously SVB have invested in a number of Irish companies, but not such a significant number that it would have a systemic impact,” said Ms Larkin. “And the nature of their model means that by and large funds have been drawn down already.
“I think the impact on the Irish ecosystem will be fairly contained,” she said, although she added that the full effect of SVB’s dramatic collapse has yet to be seen.
As of the end of February 2023, Isif had approximately $100m (€94m) invested in five investment funds managed by SVB Capital, a subsidiary of SVB Financial Group, and received distributions in excess of that amount since 2012, an Isif spokesperson said.
Isif had approximately $100m (€94m) invested in five investment funds managed by SVB Capital
“Isif has structured these investments in a manner that legally ring-fences them from the rest of the SVB Financial Group. This means Isif does not expect any impact on these investments arising from recent developments at SVB Financial Group,” the spokesperson said.
Earlier, a senior executive in Silicon Valley Bank’s Irish office told the Irish Independent that it would be “business as usual” for its Irish clients and operations, despite the bank’s issues
Clive Lennox said the bank would “absolutely” operate as normal, despite its difficulties in the US.
Silicon Valley Bank has invested up to €270m in Irish startups and companies and has been a popular bank for tech firms because of the way it’s geared toward supporting cash-hungry, high-growth enterprises.
Irish firms that used the bank included Cork-based Teamwork, Brightflag, Accuris, AMCS, Atlantic Therapeutics, Boxever, Clavis Insight (acquired by Ascential), Drop (now Fresco), Glofox, Movidius (acquired by Intel) and Profitero.
SVB executives were looking to raise capital early on Friday or find additional investors. But trading in its shares was halted before the opening bell due to extreme volatility.
Venture capital-backed companies were reportedly being advised to pull at least two months’ worth of “burn” cash out of Silicon Valley Bank to cover their expenses.
Shortly before noon eastern time, the Federal Deposit Insurance Corporation (FDIC) moved to shutter the bank.
The bank had $209bn in assets and $175.4bn in deposits as the time of failure, the FDIC said in a statement.
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