Boost local startup support, and reduce reliance on foreign banks – SVB’s collapse is a warning

The recent failure of Silicon Valley Bank (SVB) has highlighted the need to improve access to funding for startups at a local level, according to Philip Bahoshy, founder of data platform Magnitt. This presents an opportunity for local banks to offer more efficient and supportive services to startups and venture capitalists, reducing their reliance on international lenders.

SVB, which was established in 1983 and was once the go-to bank for technology entrepreneurs and startups, was seized by US regulators and placed on receivership on March 10 due to a bank run. Its collapse had a significant impact on global stock markets, with losses of around $465 billion, and sparked concerns of another financial crisis.

The fallout from the collapse left its startup clients scrambling to figure out how to continue paying their employees, but the impact on Middle Eastern startups is likely to be less profound given that many operate at a local level and have local cash accounts. However, the collapse of SVB is expected to affect confidence in the sector, leading to risk aversion and a lack of risk appetite in the venture capital space.

Moving forward, a collaboration between the banking industry and the venture capital community is vital to provide facilities and support for startups and minimize their reliance on international banks. This can help create a sustainable ecosystem that provides startups with access to local and sustainable sources of funding, promoting local investment and reducing reliance on foreign capital.