Silicon Valley Bank Bankruptcy: Implications for Local Companies

The failure of Silicon Valley Bank (SVB) rocked the global technology sector, including Quebec, and its consequences could be felt for several months.

• Also Read: Bankruptcy of SVB: Fed examines supervision and regulation of bank

• Also Read: Bank failures terrorizing the United States

Quebec-California start-up Sonder, which Investments Quebec (IQ) has invested US$20 million in 2020, revealed last week that it has US$22 million in SVB accounts, in addition to a US$13 million margin loan granted by the firm. .

Another Montreal-born startup, Repair Therapeutics, has US$5 million in deposits with Fonds FTQ shareholder, SVB.

Ready for Lightspeed and White Star

The Californian bank also gave money to other companies founded by Quebecers, including Lightspeed Commerce and White Star Capital, in which Caisse Depot and IQ invested.

“We are reassured by the intervention of the American authorities, who have announced their intention to guarantee all bank deposits. If companies in the portfolio suffer setbacks, we will assess the situation individually,” he said. Log Investment Quebec representative, Isabelle Fontaine.

A representative in Quebec

In 2021, the SVB made a foray into Quebec by making former Desjardins, Carl Thard, its representative in Montreal.

Companies here that get loans from banks have to resort to other financial institutions that are less skilled in the technology sector.

“It’s going to cost them a lot more” because of rising interest rates, noted Startup Fest founder Philippe Teleo. “Finding a line of credit is very difficult. »

iA Financial Group’s chief economist, Sebastian McMahon, believes that the banking situation in the United States will take some time to stabilize.

“We are panicked, irrational”, he summed up.

Like many economists, Mr. McMahon did not expect a contagion in Canada, where banks are strong. However, he warns that the risk of a recession hitting North America in 2023 has increased significantly.

The Office of the Superintendent of Financial Institutions announced on Sunday that it was exercising “temporary control” over the assets of SVB’s Canadian branch.