Collapse of Silicon Valley Bank rocks China’s tech start-ups, venture capital industry

The collapse of Silicon Valley Bank (SVB) has created a sense of panic within China’s tech start-up and venture capital (VC) sector, as the lender served as a bridge between US capital and Chinese tech entrepreneurs.

As of Sunday afternoon, topics related to the collapse of the bank, including “SVB bankruptcy has spread to multiple countries” and “SVB bankruptcy affects Chinese entrepreneurs”, were trending on Chinese microblogging site Weibo, with posts receiving hundreds of millions of views.

“Is the 2008 Financial Crisis happening again?” said a Weibo user with the handle MaxC.

While most tech companies and banks in China have avoided commenting publicly on the collapse, it has raised concerns among venture capitalists and start-ups in the country, many of which view the US-based bank as a golden opportunity to access the American capital market.

“Many Chinese companies listed in the US have received investment from Silicon Valley venture capital funds in their early stage,” said Zheng Lei, an adjunct professor at the Shenzhen Finance Institute of the Chinese University of Hong Kong. He added that the collapse would affect the chances of unlisted Chinese start-ups obtaining investment from Silicon Valley VC funds.

“The collapse of SVB has lowered the trust of Chinese companies in foreign banks, so they will be more cautious when considering US dollar funds,” said Fu Jian, director of Henan Zejin Law Firm.

For some start-ups, venture capitalists and private equity companies, SVB was a good choice to access the US capital market as it provided “not only a wealth of business resources, but also more networking opportunities [in the US]”, said Fu.

Garry Tan, CEO of Y Combinator, a well-known start-up incubator in the US, went so far as to call the SVB collapse “an extinction level event” for new companies that will “set start-ups and innovation back by 10 years or more”, according to Tan’s Twitter post on Saturday.