Bankruptcy of the Silicon Valley Bank: impacts for local companies

The failure of Silicon Valley Bank (SVB) has shaken the global technology sector, including in Quebec, and repercussions might be felt for several months.

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The Quebec-Californian start-up Sonder, in which Investissement Québec (IQ) invested US$20 million in 2020, revealed last week that it held US$22 million in SVB accounts, in addition to a margin loan of US$13 million granted by the institution.

Another Montreal-born start-up, Repare Therapeutics, in which the Fonds FTQ is a shareholder, had regarding US$5 million in deposits with the SVB.

Ready for Lightspeed and White StaR

The California bank has also lent money to other companies founded by Quebecers, including Lightspeed Commerce and White Star Capital, in which the Caisse de depot and IQ have invested.

“We are reassured by the intervention of the American authorities, who have announced their intention to guarantee all of the bank’s deposits. If companies in the portfolio suffer a backlash, we will assess the situation on a case-by-case basis, ”said the Journal a spokesperson for Investissement Québec, Isabelle Fontaine.

A representative in Quebec

In 2021, the SVB had set foot in Quebec by making a former Desjardins, Karl Théard, its representative in Montreal.

Companies here that held a loan with the bank will have to turn to other financial institutions that are less specialized in the technology sector.

“It will cost them a lot more” because of rising interest rates, notes Philippe Telio, founder of Startup Fest. “It will be more difficult to find a line of credit. »

iA Financial Group’s chief economist, Sébastien McMahon, believes that it will take some time before the banking situation stabilizes in the United States.

“We are in panic movements, in irrationality”, he summarizes.

Like most economists, Mr. McMahon does not expect contagion in Canada, where the banks are stronger. 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 now exercises “temporary control” of the assets of the Canadian branch of the SVB.

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