SILICON VALLEY BANK’S CLOSURE THREATENS AFRICAN STARTUPS

By Lisa Vives Global Information Network

Silicon Valley Bank, the bank of choice for most startups and venture capitalists, is no more.

It was closed after the bank announced it had lost $1.8 billion in the sale of treasuries and securities.

Millions of dollars banked by startups and venture capital funds were at stake until the U.S. Federal Reserve acted to save the day.

So what does this have to do with Africa?

The closure of SVB triggered panic on the African continent, and that fear is not without reason, according to the head of American technology startup accelerator Y-Combinator (YC) which has 80 African startups in its portfolio.

“30% of our companies exposed through SVB can’t make payroll in the next 30 days,” said YC president, Garry Tan. “All the startup founders groups I’m in are in full-on panic mode. Everyone is moving money around. Nobody knows which banks are safe.”

SVB was the bank that lent to startups and asked that startups have deposits in the bank as collateral.

The bank offered loans against shares for founders and cashflow loans. Since 2019, SVB has been the preferred bank for startups.

In the wake of the bank’s collapse, founders in Africa are reviewing their banking options to cushion their startups from such eventualities, according to Techcrunch. com. Nala, a U.K.-based and Africafocused mobile money transfer startup that managed to pull its funds out of SVB before it collapsed, told the online newspaper that it’s exploring partnerships with new large corporate banks. The pan-African fund Future Africa, which suffered “minimal exposure” also hinted that it was keen on opening an account with a global banking institution.

Jumba, a Kenyan construction tech startup, is looking to diver- sify its deposit holdings, with co-founder Kagure Wamunyu telling TechCrunch the startup is opening an additional account with a “bigger bank” in the U.S.

African fintech unicorn Chipper Cash was among several startups that could not access a portion of their funds, it was reported. They reported one million USD deposits in SVB but CEO Ham Serunjogi downplayed the company’s exposure. “Most of our funds are in various other banks in US & around the world,” he tweeted. SVB was a great supporter & partner of Chipper. Sad to see them go down.”

Also affected was a Dutch wealth manager offering investment banking and corporate services, including opening SVB accounts, to mainly Egyptian startups. Most were likely part of the nearly 50