[ad_1]
Breadcrumb Trail Links News Local News Local Business Business
“I think disproportionately Calgary-based…those who landed in this low-investment environment will ultimately be in a better position”
Published March 17, 2023 • Last updated 6 hours ago • 4 minute read
Benjamon Kemp, CEO of Ambyint, said the collapse of SVB is a success for local developers. “I think the trust has been silenced, for sure.” Photo by Azin Ghaffari /Postmedia Content of the article
The collapse of Silicon Valley Bank sent shockwaves all the way to Calgary.
Advertising 2
This ad hasn’t been uploaded yet, but your article continues below.
THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY
Sign up now to get the latest news in your city and across Canada.
Unlimited online access to articles from across Canada with one account Get exclusive access to the Calgary Herald ePaper, an electronic replica of the print edition that you can share, download and comment on Enjoy insights and behind-the-scenes analysis of our award-winning Journalists Support local journalists and the next generation of journalists Daily puzzles including the New York Times crossword SUBSCRIBE TO UNLOCK MORE ARTICLES
Sign up now to get the latest news in your city and across Canada.
Unlimited online access to articles from across Canada with one account Get exclusive access to the Calgary Herald ePaper, an electronic replica of the print edition that you can share, download and comment on Enjoy insights and behind-the-scenes analysis of our award-winning Journalists Support local journalists and the next generation of journalists Daily puzzles including the New York Times crossword SIGN UP TO UNLOCK MORE ARTICLES
Create an account or log in to continue your reading experience.
Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Receive email updates from your favorite authors Article Content
The Bank of California was the preeminent financial institution for financing the startup and technology sector in North America. Some companies had debt financing through the bank, some managed their accounts through the bank, while others had tied venture capital investments through it.
By clicking the subscribe button you agree to receive the above newsletter from Postmedia Network Inc. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails or any newsletter. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300 Thanks for signing up!
Article content
Benjamin Kemp, CEO of Ambyint, a Calgary-based oil well optimization software company, spent the weekend figuring out how the company would do payroll for its nearly 40 employees. Moves by the US and Canadian governments to shore up banks and secure access to accounts have helped solve the problem for now.
Article content
He said the bank’s collapse is a blow to local developers.
“I think the trust has definitely been silenced,” Kemp said. “When you’re in this world of startup software, your eye on cash is 100%. . . this is for risky, tough-skinned people who want to take on that kind of work. You have to have a good set of nerves for this.
Article content Advertising 3
This ad hasn’t been uploaded yet, but your article continues below.
Content of the article 10% of Canadian venture capital-backed companies had deposits with the SVB
Ambyint was not alone. Kemp said most of the founders and CEOs he spoke to had exposure to SVB.
Kemp pointed to a series of bad bond investments made by the bank, which was then crushed by rising interest rates, leading to bankruptcy.
Article content
Last week, Silvergate Capital, a bank focused on cryptocurrency, went bankrupt. At the same time, the SVB warned investors that it needed to raise $2 billion in capital and sold a bond portfolio at a loss of $1.8 billion to cover it. This triggered a domino effect and triggered a run on deposits, leading to its bankruptcy.
It is the largest bank collapse since 2008.
The technology sector will bear the brunt of the impact.
The Canadian Venture Capital Private Equity Association (CVCA) wrote to Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng this week, noting that 10% of Canadian venture capital-backed companies had deposits at SVB, adding that many others had frozen bank accounts.
Advertising 4
This ad hasn’t been uploaded yet, but your article continues below.
Article content
The CVCA has warned of the long-term effects of the collapse and has asked the Business Development Bank of Canada to set up a $300 million bridging loan program, similar to the one used during COVID-19, and to accelerate the flow dollars of risk towards the Canadian market by lowering the Fund of Funds threshold.
Venture capital ever more selective, tests ever more demanding than projects
One upside of the crash is that it appears to have spurred the need for startups and technology investments in Canadian banking institutions, something that had previously been minimal.
Terry Rock, president and CEO of Platform Calgary, noted that 60% of direct funding for Canadian tech companies comes from the U.S.
Advertising 5
This ad hasn’t been uploaded yet, but your article continues below.
Article content
RBCx is currently leading the charge in Canada on this note, while other institutions such as the BMO and CIBC are also working to expand into this space.
Calgary’s technology sector has spent the past five years riding record venture capital investments, outpacing other major jurisdictions in its growth. Rock said this crisis could potentially have a short-term deterrent effect, due to fewer options to finance expansion through the use of debt instruments.
“This is a risk, a nationwide problem,” Rock said. “(Canada) really needs to start making sure that we are taking steps to support some of the things that have been quite a risk. This will instill confidence and practically grow the business as well.
The challenge with startups is to secure funding before entering the venture capital stage, especially if they are operating without assets that can be tapped. This often requires debt financing, something that has become even more difficult to secure due to shifting global economic pressures.
Advertising 6
This ad hasn’t been uploaded yet, but your article continues below.
Article content
Venture investors are also becoming more selective than they were 12-18 months ago, asking for more evidence than projections to make their choices.
Calgary tech remains strong in the face of economic uncertainty Calgary’s tech sector looks to take the spotlight at SXSW Austin North America, UK employers view Calgary positively “(C) companies that have learned how to do more with less will come out on top’
Canada has always had stricter banking regulations than its American counterparts, which has helped the country’s big six banks avoid this kind of collapse. There are thousands of banks in the US that have been pushing innovation in the face of competition, but have also engaged in increased risk-taking.
Advertising 7
This ad hasn’t been uploaded yet, but your article continues below.
Article content
“Canada lags a little behind the United States in terms of innovation,” said Alfred Lehar, an associate professor at the University of Calgary’s Haskayne School of Business. “This new technology and innovation is really important for long-term economic growth in Canada and also for creating jobs in the future.”
Brett Colvin, CEO and co-founder of Calgary-based Goodlawyer, sees potential for Calgary’s tech scene amid the financial chaos.
He said this was partly due to the lack of access to funds that Calgary startups have had compared to those in the United States, which has led to a more responsible spending culture and decision-making by local companies.
Colvin posted on LinkedIn earlier this week urging tech companies north of the border to be ready to take advantage of the opening that will be created when the dust settles on this banking crisis.
“I think companies that have learned to do more with less will come out better,” he said. “I think the disproportionately Calgary-based or Canadian-based companies that have emerged in this low-investment environment will ultimately be in a better position.”
Twitter: @JoshAldrich03
Share this article in your comments on social networks
Postmedia is committed to maintaining a lively but civil discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour for moderation before appearing on the site. We ask that you keep your comments relevant and respectful. We’ve enabled email notifications – you’ll now receive an email if you get a reply to your comment, there’s an update to a comment thread you follow, or if someone you follow comments. Visit our Community Guidelines for more information and details on how to change your email settings.
Join the conversation Advertisement 1
This ad hasn’t been uploaded yet, but your article continues below.
|
Sources 2/ https://calgaryherald.com/business/local-business/calgary-tech-scene-sees-opportunity-in-the-wake-of-silicon-valley-banks-collapse The mention sources can contact us to remove/changing this article |
[ad_2]