US regulators have shut down Silicon Valley Bank, a move that has sparked worries within the Irish start-up community. One Irish company owner has described pulling funds from the bank as recently as Thursday evening as its share price descended.
The bank, which is a significant investor in the start-up sector through its partnership with the State-backed Irish Strategic Investment Fund (ISIF), was taken over by the Federal Deposit Insurance Corporation (FDIC), which is acting as receiver, on Friday. The move rattled investors across the world, with banking stocks in particular feeling the pressure.
SVB, which operates Silicon Valley Bank, has provided finance to Irish technology businesses and has made a number of investments in the Irish start-up ecosystem since it began operating here in 2012. Among the Irish companies that have successfully done business with SVB in the past are Diaceutics, Accuris, Boxever, Clavis Insight, Profitero, Glofox, AMCS, and Intel-owned Movidius.
As of the end of February, ISIF had about $100 million (€94 million) invested in five investment funds linked to SVB. However, these funds are managed by SVB Capital, a subsidiary of the SVB Financial Group, and are separate to the bank’s own loans. A spokesman for ISIF said the investments were structured “in a manner that legally ring-fences them from the rest of the SVB Financial Group” and did not expect any impact on these investments arising from SVB Financial Group’s difficulties.
“The distributions received by ISIF from these investments since 2012 exceed the amount currently invested,” the spokesman added.
While the bank is expected to continue its activities under the receiver, the move has left tech companies and start-ups reeling across the world. Sources in the Irish start-up scene said the bank had been an advocate for start-ups, and was one of the most friendly banks towards fledgling businesses. Friday’s development may also have wider implications for those seeking to expand in the US, cutting off a potential avenue for growth.
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Among the Irish companies that had money with the bank was cosmetic treatment chain Sisu. Its chief executive, Pat Phelan, said the company took the decision to pull its funds from the bank hours before it was shut down. The company held its deposits with the bank, a figure that amounted to millions for Sisu, he said.
“I was extraordinarily concerned when I read the background to all this happening,” he said. “I was watching the share price yesterday. As the share price went down I knew it was going to cause a run on the bank. We’re Irish; there’s no mystery to all of us what happens.”
He said he contacted Sisu’s chief financial officer Paul Healy and told him to pull the deposits, with the money arriving in the company’s Irish account by this morning.
Silicon Valley Bank had about $209 billion in total assets at the end of last year, and $175.4 billion in total deposits. The FDIC said all insured depositors would have full access to their insured deposits no later than Monday morning, and uninsured depositors would be paid an advance dividend within the next week and receive a receivership certificate for the remaining amount of their uninsured funds.
The exact amount of uninsured deposits is not yet known.
According to the FDIC, the standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. That means the FDIC will provide separate coverage for deposits held in different account ownership categories.
