Canada’s Tech Sector Largely Unaffected by Silicon Valley Bank Collapse

On March 10, 2023, Silicon Valley Bank’s failure caused a global stir in the tech industry. However, Canada’s technology sector was already projected to emerge with minimal impact before regulators’ announcement that all its depositors would be made whole. While this news brought some relief, Canadian tech companies still expressed concerns about the long-term impact of SVB’s demise.

Worries about Investor Confidence

The Canadian tech industry has been facing a downturn, with valuations crashing in late 2021 and companies such as Shopify and Lightspeed laying off over 300,000 people globally. The failure of SVB is likely to aggravate the situation, with an increasing worry over trust and willingness to invest in the tech sector. Benjamin Bergen, the president of the Council of Canadian Innovators, which represents domestic technology companies, fears it will worsen.

Tightened Capital and Disappearance of SVB

SVB was a core financier of tech companies for decades, bringing about concerns that the disappearance of the bank will further tighten available capital for startups, which have already had to reduce spending due to dwindling investor interest. Collectively, these companies have driven job growth and wealth creation for years; however, the pandemic’s unprecedented impacts have adversely affected the sector. As a result, their Capital’s technology research analyst team believes that limited funding to the early-stage firms would be a net negative for the healthcare and technology ecosystems.

Meanwhile, Maria Pacella, managing partner with Vancouver-based Pender Ventures, adds that there are also long-term concerns about what the tech landscape will look like with fewer funders. “Who will take up that spot and ensure this doesn’t just get concentrated in our top banks? That isn’t good for anyone,” she said.

Related Facts

• SVB’s failure on Friday was tense and busy, with technology companies making emergency plans and bombarding banks with requests to move money to safety.
• Industry associations surveyed members and contacted political leaders to prepare them for what could happen next.
• The pandemic has hit the Canadian tech industry hard, with venture capital investment dropping 44% from CAD 3.7 billion in 2019 to CAD 1.8 billion in 2020.

Key Takeaway

Despite the worst-case scenario, the impact of the demise of SVB on Canada’s technology sector is likely to be limited in the immediate term. However, there are still worries about the long-term impact of the bank’s collapse on investor confidence and the availability of capital for startups.

Conclusion

The collapse of Silicon Valley Bank came as a shock to the global tech industry. While Canada’s tech sector is expected to emerge largely unscathed from its failure, concerns about confidence and capital availability could me concerns n a bumpy road ahead for many startups. Only time will tell the full extent of the impact of SVB’s collapse on the industry.