Dozens of founders and investors tell Sifted that UK startups are today withdrawing capital from US-headquartered Silicon Valley Bank (SVB) — one of the startup world’s biggest lenders — amid concerns over its liquidity. That's despite warnings from investors that withdrawing money could make the situation at SVB worse.
The uncertainty comes after SVB announced yesterday in the US that it was selling shares to bolster its finances after a significant portfolio loss. The announcement caused shares in the bank — which is also one of the largest in the US — to plummet 60%. The bank says that it has ample liquidity to manage its needs.
SVB in the UK is a wholly owned subsidiary of the US bank (as of last year), which means its balance sheet is ring-fenced and the US has no ability to pull assets from the UK, according to an email seen from an SVB director to a customer today. Startups that are SVB customers and have business in the US are likely to have a separate account across the pond, however, investors say.
“A quarter of our portfolio banks with SVB, and I’d say 70-80% are all making plans this morning to move money to Wise, Brex etc,” says a Berlin-based early-stage partner.
“Any founder would act very conservatively,” says a London-based Series A VC partner. “Founders are going to do what they’re going to do; if there is any risk, they’re probably not going to take that — they have businesses, payroll.
“I don’t think VC advice is really relevant at this point; VCs are not the customers. If a bank has lost trust with its customers that’s the issue,” they add.
SVB UK released a statement on Friday afternoon saying that "Silicon Valley Bank UK has been an independent subsidiary since August 2022 with a separate balance sheet to the SVB Financial Group and an independent UK Board of directors."
SVB’s place in the market
SVB counts nearly half of all VC-backed startups in the US as customers, and is similarly well-used in the UK, where it has been active since 2004. It has since opened offices in Ireland, Germany, Denmark and Sweden.
Its UK customers have included companies like Snyk, Graphcore and Wise, and some of the continent’s biggest VCs, such as Atomico, Index and Accel.
The bank’s international arm is still a very small part of its total business. In 2022, only 18% of deposits were from international clients, and international global fund banking only represented 3% of total client funds.
Update: One London VC firm has asked its LPs to stop sending money to its account with SVB.
Update: At 5pm GMT on Friday, SVB was shut down by California regulators. A few hours later, the Bank of England declared it is starting insolvency proceedings for SVB UK.
Amy Lewin is Sifted’s editor and cohost of Startup Europe — The Sifted Podcast, and writes Up Round, a weekly newsletter on VC. She tweets from @amyrlewin
Eleanor Warnock is Sifted’s deputy editor and cohost of Startup Europe — The Sifted Podcast, and writes Up Round, a weekly newsletter on VC. She tweets from @misssaxbys
15:30 pm, Mar 10: updates with SVB comment in paragraph seven.
