A BC company is attempting to withdraw its funds following the collapse of California’s Silicon Valley Bank (SVB) last week.
“We can see our money, but it’s on the other side of the glass. We can’t find out,” said Vancouver-based CEO Michael Ferguson.
His digital health company, Ayogo Health, was introduced to SVB through their venture capital investors.
SVB provided a suite of products focused on startup companies, Ferguson says, which convinced them to build up a $750,000 venture debt.
The bank held $200 billion in assets for companies in the technology and healthcare sectors before the crash.
“That’s a significant portion of our cash reserves… We couldn’t make any of those transfers [out of the U.S.]. The bank collapsed pretty quickly,” he said.
A decline in venture capital funding in the technology industry and rising interest rates forced SVB into bankruptcy.
The collapse marks the second largest banking collapse in US history, after the collapse of Washington Mutual in 2008.
“We have to do the payroll. We have to serve our customers. We have to pay other vendors who rely on us,” said Kris Hartvigsen, CEO of Dooly, a Vancouver-based technology company.
“Our biggest concern is the stability of our business.”
Ferguson, Hartvigsen and other tech CEOs are now rethinking their financial investments and planning a return to more “robust” Canadian banks. They are calling on the Canadian government and banks to invest in a scheme similar to SVB’s to support tech startups.
move money
Hartvigsen says his startup company “has done almost everything [its] Banking at the SVB.”
“When we started the business, that’s where we actually put all our money,” he said, adding that the majority of tech companies have preferred SVB over traditional banks because of their reputation for speed and quality customer service .
Hartvigsen says he transferred his money to the Royal Bank of Canada within minutes after hearing rumors of a crash.
“We feel stable today, [but] I have friends who weren’t quite so lucky…[and] trying to figure out whether or not they have capital left,” he said, adding that some of those companies had nearly $70 million at SVB.
Earlier this week, the US government confiscated SVB’s assets with assurances that all of its customers would have access to funds, regardless of how much they had in the bank.
Ferguson says he’s not worried about losing his deposit – they have other funds at Canadian banks to cover the costs – but he’s not sure when the money will be transferred from SVB.
The US government is allowing access to funds within the country, Ferguson says, but is halting international remittances for now.
“[The U.S. government] is more concerned about US customers, US companies and US citizens’ money than Canadians,” he said.
On March 15, Canada’s Superintendent of Financial Institutions assumed permanent control of SVB’s Canadian subsidiary to head off a potential banking crisis.
Earlier this week, the UK facilitated the sale of SVB UK to Europe’s largest bank, HSBC.
Time for Canada to fight back
Ferguson hopes people “don’t learn the wrong lessons from what happened.”
He says tech companies know the US is risky with a bad history of well-regulated banks, but that scenario has now fueled the movement to seek a Canadian solution.
“We need products like Silicon Valley Bank that are available to us in Canada. Canadians need to take care of Canadians.”
According to Hartvigsen, Canada would be the perfect place to support the tech industry.
“Our banking system is a bit more robust up here…the Canadian banking system is very diversified.”
Given last week’s panic, Hartvigsen says many tech CEOs are banding together to stay with Canadian banks for now and are “breathing a big sigh of relief right now.”
