African tech founders speak up about Silicon Valley Bank impacts
Africa’s startup founders and investors are watching what happens next for Silicon Valley Bank (SBV), which was shutdown by regulatory authorities in the United States on Friday—essentially freezing thousands of accounts at the tech-friendly bank and raising questions about what happens to startup funds.
“Check in on your fellow tech founder friends,” said Benjamin Fernandes, head of the Tanzania-based NALA fintech firm also operating in Kenya, Uganda, Ghana and Rwanda. “We had most of our money in SVB. Moved it all to another bank. Literally an hour later, couldn’t log back in to SVB,” he said in a social media message.
SVB has long supported the startup ecosystem from San Francisco, with roughly half of all venture capital-backed tech and life science companies in the United States doing business there, according to the SVB website. But it’s also a strong partner with startup firms like incubator Y Combinator, holding accounts from Africa and across the world.
Some 30% of Y Combinator startups with SVB exposure are unable to make payroll, said Garry Tan, the president and CEO at Y Combinator. Others are affected with different degrees of impact, including Artifact, a Moroccan-owned business with all its funds at SVB.
Fintech firm Chipper Cash, founded by Ham Serunjogi of Uganda and Ghanaian Maijid Moujaled, had about US$1 million at SVB when it closed. “SVB has been the most important banking partner to the entire Silicon Valley ecosystem,” said Serunjogi in a statement issued Sunday.
“A little known fact is that five years ago when I was trying to open Chipper’s first bank account, SVB was the only bank that would accept us. I know there are countless other startups all doing very important work who would say the same thing. Therefore, it is quite sad to see such a pillar of our ecosystem brought to its knees.”
In the U.S., an account deposit is protected up to $250,000 when a participating institution fails. That’s true for SVB, but more than 37,000 small businesses hold far more than that, many of them with SVB as their only account, according to a Y Combinator petition calling for intervention on their behalf. Some estimates suggest 85% of the funds at SVB are not insured.
U.S. banking authorities plan an emergency meeting Monday to explore options for dealing with the crisis.
Chipper had insignificant exposure to SVB ~$1m. Most of our funds are in various other banks in US & around the world. SVB was a great supporter & partner of Chipper and entire Silicon Valley ecosystem. Sad to see them go down. My full statement here – https://t.co/gI8oKqmUS3
— Ham Serunjogi (@HSerunjogi) March 12, 2023
Image: Chipper Cash