SVB's Canadian division, which received a license to operate
in 2019, competed against other banks and private lenders to
help finance the growth of the Canadian technology sector,
before it collapsed on Friday. It had doubled its secured loans
to C$435 million ($314 million) in 2022 from previous year.
Canada had come to be known as the world's second-biggest
global tech hub in the world after Silicon Valley, Kim Furlong,
CEO of Canadian Venture Capital and Private Equity Association
told CBC News on Monday.
Companies including Shopify Inc were examples of
Canada's tech success story, which helped pull more investments
into the sector.
U.S. regulators stepped in on Sunday after the collapse of
SVB, which had a run after a big bond portfolio hit.
CIBC , Royal Bank of Canada and Bank of
Montreal were the most likely to pick up both SVB's
current book, and future clients in Canada, John Ruffolo,
Managing Partner Maverix Private Equity, a Toronto-based PE firm
said.
All three banks have dedicated technology lending groups.
A spokesperson for RBC declined to comment while CIBC and
BMO did not respond to requests for comment.
Selfe at INFOR Financial said while SVB Canada was a smaller
player "it was an important competitor in that market."
"I think Canadian banks will continue to lend to earlier
stage technology companies but without Silicon Valley Bank as a
lender, I think they can afford to be much more selective in who
they lend to and potentially increase the price at which they
lend."
Canada's top six banks already control more than 80% of the
banking assets and the industry has come has attack from
consumers advocates and politicians for its dominance.
Benjamin Bergen, president at Council of Canadian
Innovators, a lobby group for Canadian technology companies,
agreed.
"Before SVB went down, accessing capital was increasingly
becoming tighter and tighter for Canadians for startups for
scale ups," he said.
"And with this, really what we're hearing from the ecosystem
is, you know, it is going to make it even more difficult, so
that's really what we're monitoring."
Canadian companies saw overall venture capital investment of
C$1.3 billion ($947.38 million) so far this year, compared to
C$4.5 billion over the first three months of 2022 and C$3.5
billion over the same period in 2021, according to Refinitiv
data.
Funding environment for start-ups was already getting
difficult due to rising interest rates. Investors were also
turning selective due to the threat of a recession. Aside from
the banks, the federal government also has a Venture Capital
Catalyst Initiative program that invests in promising Canadian
technology companies.
($1 = 1.3722 Canadian dollars)
(Additional reporting by David Ljunggren in Ottawa
Reporting by Maiya Keidan and Divya Rajagopal
Editing by Edward Tobin)
By Maiya Keidan and Divya Rajagopal
TORONTO, March 13 (Reuters) - Last week's sudden
collapse of Silicon Valley Bank (SVB) could choke funding for
Canada's technology start-ups and place them in the hands of
domestic lenders who may be more selective in financing new
ventures, financiers told Reuters.
That would be bad news for a sector that took a beating in
2022, which has made investors more risky averse in early stage
investments.
"I would say this is probably the worst possible time (for
this to happen) in the last decade because of the tech pullback
we've had," said Neil Selfe, CEO at advisory INFOR Financial.
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