The tech-focused bank, the Silicon Valley Bank (SVB), crashed this month following recorded losses in its financial portfolio and was forced to shut down. This is the biggest bank failure in the USA since 2008.
The crash was due to the inability to manage its assets properly. SVB failed investments and lost over 1.8 billion dollars in the sale of treasuries and securities.
Before the collapse, millions of dollars for tech startups and venture capitalists were deposited into SVB, and the crash left business owners confused. Luckily, the US Federal Reserve came out to save the day by reassuring SVB customers that their money is safe. The US Federal Deposit Insurance Corp. (FDIC) protects consumers against loss of up to $250,000 if their bank or thrift institution fails.
SVB is a bank for tech companies in the US and the world. It was one of the most accommodating banks for startups, giving them access to loans even at the infancy stage of their companies.
SVB is where many African startups deposit revenues. SVB also invests in many African startups, such as Chipper Cash. But with the collapse, African startups will find it more difficult to partner with US banks.
Due to this unexpected crash, African startups must diversify their banking relationships and refrain from relying on a single financial institution to prevent such risks.
The good news is that the African government and ecosystem are beginning to believe in tech and fund startups. For example, the Nigerian government has launched a funding program for tech startups and entrepreneurs worth over $600 million. The government will give its citizens access to seed funds for germinating ideas. As time passes, there will also be expansion and growth funds to help this startup reach its full potential.
With the collapse of one of the world’s top banks, what is your take on the banking system? Should it still be trusted, or has it become inconsistent over time? Share your insights in the comments section below.
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Photo by Maria Shalabaieva
