The panic caused by the failure of Silicon Valley Bank has spread to China, the world’s second largest venture capital market. Across social media platforms, investors and startups are scrambling to share news stories about the debacle and thoughts on how to prevent such devastating moments. But for some companies, the impact is tangible.
In the late 1990s, when China was still new to venture capital, SVB was one of the first financial institutions to start serving the country’s start-ups. Over time, the bank has become a popular option for US dollar-funded China-based startups and China-focused US dollar venture capital firms.
In the US, VCs have been urging investee companies to withdraw money from SVB as soon as banks have announced they intend to sell shares in search of more capital. According to three of his founders and two of his investors TechCrunch spoke to, investors are recommending the same for banking-related Chinese startups.
“When people saw SVB’s share price drop 30% in pre-market trading, they realized things weren’t right,” said one of the Chinese founders of an app targeting North American users. people said. “After my American investor told me, I immediately told other Chinese colleagues [to withdraw money from SVB]”
SVB’s localized efforts in China seem unaffected so far. SVB first started operations in China in 1999, according to its website. In 2012, it established a joint venture with Shanghai Pudong Development Bank, the first licensed Sino-American joint venture bank since 1997.
Bloomberg previously reported that the JV was urging clients to calm down, saying it was “unaffected by the turmoil surrounding US lenders.” The bank later said in a statement that it had a “sound corporate structure and an independent balance sheet.”
Since its establishment, the JV has pioneered a range of services, including China’s onshore banking financial products and services, including liquidity solutions, trade finance, local and foreign currency deposits, wealth management, foreign exchange settlement and sales services.
For more information on what triggered the downfall of SVB, read my colleague Alex Wilhelm’s explanation.
This is a developing story…
