Great panic broke out around the collapse of the Silicon Valley Bank – also in the German start-up scene. The head of the industry association, Christian Miele, is confident.
The German start-up association is optimistic that the consequences of the collapse of the Silicon Valley Bank for the local start-up industry will be limited. “Originally, this is not a start-up crisis. These are refinancing problems for a bank,” said Christian Miele, chairman of the Federal Association of German Startups, in Berlin. He does not believe that the collapse of the US start-up financier will cause major financing problems for the industry in this country. “I’m confident that there will be no major reluctance among venture capitalists across the board.” However, the consequences for German start-ups cannot yet be conclusively assessed.
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Funds from German startups secure
The branch of Silicon Valley Bank in Germany, which was closed by the financial regulator Bafin on Monday, did not operate any deposit business. According to Miele, some startups in this country have used the offers of the British SVB subsidiary. The takeover by the major British bank HSBC seems to ensure that German startups who have deposits there will have access to their money again. “It was an important step to avoid short-term liquidity bottlenecks in affected German start-ups.”
An advantage for Germany: The form of financing venture debt – special loans for fast-growing companies, in which the SVB was specialized – is not very common here, said Miele.
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How the SVB collapsed
The Californian Silicon Valley Bank (SVB), which specializes in start-up financing, was closed on Friday after a failed emergency capital increase and placed under state control. Previously, customers had withdrawn large amounts of money in a short period of time. The US Federal Reserve has announced an investigation.
The collapse of the bank comes at the wrong time for the German start-up industry. Because of rising interest rates in particular, financiers have recently been reluctant to make large capital injections and have shied away from risky business models. While the startup industry celebrated a record year in 2021, financing for German startups collapsed in 2022. As a result, the valuations of startups collapsed, and some growth companies cut jobs in droves.
The Federal Ministry of Economics did not comment on Monday what effects the collapse of the SVB could have on the German start-up industry. However, a spokeswoman pointed out that there are many financing options for start-ups in Germany. They are only partly based on banks, and there are also state subsidy programs and private investors.
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