B.C. tech companies scramble after collapse of Silicon Valley Bank
U.S., Canada and U.K. governments seized Silicon Valley Bank and its subsidiaries to prevent a banking crisis
A B.C. company is scrambling to withdraw its funds following the collapse of California-based Silicon Valley Bank (SVB) last week.
"We can see our money, but it's on the other side of the glass. We can't get it out," said Vancouver-based CEO Michael Fergusson.
His digital health company Ayogo Health was introduced to SVB through their venture capital investors.
SVB provided an array of products focused on startup companies, says Fergusson, which convinced them to start a venture debt of $750,000 US.
The bank held $200 billion in assets for firms in the technology and health-care sectors before the crash.
"That's a significant portion of our cash reserves … We weren't able to do any of those transfers [out of the U.S.]. The bank collapsed quite quickly," he said.
A decline in venture capital funding in the tech industry and rising interest rates forced SVB into insolvency.
The collapse marks the second-biggest bank failure in U.S. history, following the 2008 collapse of Washington Mutual.
Kris Hartvigsen, the CEO of Dooly, a Vancouver-based tech company, says the bank's collapse has created significant turmoil.
"We have to run payroll. We have to service our customers. We have to pay other vendors relying on us. Our number one concern is the stability of our business."
Fergusson, Hartvigsen and other tech CEOs are now rethinking their financial investments and planning a move back to "more robust" Canadian banks. They're calling on the Canadian government and banks to invest in a system similar to SVB to support tech startups.
WATCH | Tech CEO Michael Fergusson talks about the way forward following SVB's collapse:
Moving the money
Hartvigsen says his startup company "did almost all of [its] banking with SVB."
"When we started up the business, that's actually where we put all of our money," he said, adding the majority of tech companies favoured SVB over traditional banks for its reputation of working fast with quality customer service.
Hartvigsen says he transferred his funds to the Royal Bank of Canada within minutes of hearing rumours of a crash.
"We're feeling stable today, [but] I have friends that were not quite as fortunate …[and] trying to figure out whether or not they had any capital left," he said, adding some of these companies had close to $70 million at SVB.
Earlier this week, the U.S. government seized SVB's assets with assurances all its customers would have access to funds, regardless of how much they had in the bank.
Fergusson says he's not worried about losing his deposit — they have other funds in Canadian banks to cover costs —but he's not sure when the money will transfer from SVB.
The U.S. government is allowing access to funds within the country, says Fergusson, but stopped international transfers for now.
"[The U.S. government] is more concerned about U.S. customers, U.S. companies, U.S. citizen's money than they are about Canadians," he said.
On March 15, Canada's superintendent of financial institutions took permanent control of SVB's Canadian subsidiary to prevent a potential banking crisis.
Earlier this week, Britain facilitated the sale of SVB U.K. to Europe's biggest bank, HSBC.
Time for Canada to step up
Fergusson hopes people "don't take the wrong lesson from what's happened."
He says tech companies know the U.S. is risky with a poor history of well-regulated banks, but this scenario has now energized the movement to find a Canadian solution.
"We need products like Silicon Valley Bank to be available to us in Canada. Canadians need to look after Canadians."
Hartvigsen says Canada would be the perfect place to support the tech industry.
"Our banking system is a little bit more robust up here … the Canadian banking system is very diversified."
Given the panic of last week, Hartvigsen says many tech CEOs are sticking together to stay with Canadian banks for the time being and "breathing a big sigh of relief right now."
With files from The Early Edition and On The Coast.