Impact of the SVB collapse on the Swiss startup ecosystem

Impact of the SVB collapse on the Swiss startup ecosystem unknown

Due to the close interconnectedness of the US and Swiss venture markets, the impact of the collapse of Silicon Valley Bank in Switzerland should not be underestimated. We provide an overview of direct, indirect and systemic consequences. This article will be updated regularly.

After the US deposit insurance fund FDIC took control of Silicon Valley Bank, nervousness is also high in the Swiss start-up ecosystem. It is not yet possible to determine definitively how great the damage will be for the start-up scene in the USA and worldwide. This depends in particular on how quickly the FDIC releases currently blocked funds from start-ups and VCs. The FDIC has announced that the depositors of Silicon Valley Bank will already today have full access to their insured deposits, i.e. to a maximum of $250k. For amounts exceeding this, the FDIC will pay uninsured depositors an advance dividend within this week.

However, it is still unclear when and how much will be paid out. Another possible scenario is that a larger bank takes over the SVB Group or parts of it so that the obligations can also be met. But here, too, it is unclear how long this would take. In the worst case, large sums would be inaccessible for weeks or even months.

Direct impact

Some Swiss start-ups with activities in the USA were clients of Silicon Valley Bank and are thus directly affected. This concerns some scale-ups as well as some startups with a strong foothold in the USA. One example is Earkick. The number seems to be relatively low at the moment.

Swiss VCs also seem to be hardly affected directly. Only a few names of Swiss investors with activities in the USA appear on a list of funds that were depositors of the Silicon Valley Bank that is circulating on the internet.

Indirect effects

US investors play an important role for Swiss start-ups. In recent years, US VCs have invested at least as much in Swiss startups as investors from Switzerland. Many US investors are now affected twofold by the collapse of Silicon Valley Bank. Not only themselves, but also their portfolio companies had money deposited with the bank. These VCs will focus entirely on providing their portfolio companies with liquidity. As long as the situation is not clarified by the FDIC or a takeover, hardly any new investments will be possible.

Swiss VCs are also traditionally very active in the US. In recent years, they invested more money there than in Switzerland. These VCs are now under pressure because their portfolio companies were often clients of Silicon Valley Bank.

These indirect consequences are particularly severe as the sums invested in Swiss start-ups have been declining since the second half of 2022.

Systemic effects

The high number of startups and investors affected shows that Silicon Valley Bank was an important part of the infrastructure of the US ecosystem. This role must now be taken over by other banks. If the remains of Silicon Valley Bank are not sold, this may take some time.

VC fundraising could also be affected by the collapse. Potential investors could be deterred because the venture market has obviously not yet adjusted to the new conditions with higher interest rates and political uncertainties.

Potential clients of start-ups could also be deterred. The collapse of the bank and the global consequences once again demonstrate that startups are exposed to greater risks than traditional SMEs.