SVB debacle is causing panic in China’s start-up industry

Panic sparked by the collapse of Silicon Valley Bank is spreading to China, the world’s second-biggest venture capital market. On social media platforms, investors and startups are rushing to share news articles about the fiasco and thoughts on how to prevent such a cataclysmic moment. For some companies, however, the impact is tangible.

When China was still new to venture capital in the late 1990s, SVB was one of the first financial institutions to start servicing the country’s startups, while traditional and risk-averse banks shunned them. Over time, the bank has become a popular choice for USD fundraising by China-based startups, as well as some China-focused USD VC firms.

In the US, venture capitalists have been urging their portfolio companies to withdraw money from SVB as soon as the bank announced it intended to sell shares in search of more capital. Investors are advising Chinese startups exposed to the bank to do the same, according to three founders and two investors TechCrunch spoke to.

“People realized things were not going well after seeing SVB shares drop 30% in pre-market trading,” said one of the Chinese founders, whose app is aimed at North American users. “I immediately told other Chinese peers after my US investors told me [to withdraw money from SVB].”

SVB’s localized effort in China appears to be unaffected, for now. According to its website, SVB began operating in China in 1999. In 2012, it formed a joint venture with Shanghai Pudong Development Bank, the first Sino-US joint venture bank to be licensed since 1997.

Bloomberg previously reported that the JV is urging its clients to remain calm, saying it is “unaffected by the turmoil surrounding the US lender.” The bank later said in a statement that it has “a strong corporate structure and a balance sheet that operates independently.”

Since its establishment, the JV has developed a list of services, including onshore banking financial products and services in China, including liquidity solutions, trade finance, local and foreign currency deposits, wealth management and foreign exchange settlement and sales services. .

For a more detailed description of what triggered SVB’s downfall, read my colleague Alex Wilhelm’s explanatory.

This is a developing story…

Read more about the collapse of SVB in 2023 on TechCrunch

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James D. Brown
James D. Brown
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