Chinese Startup Competing Wants To Be An Alternative Silicon Valley Bank

Dollar (Photo: Doc. Antara)

JAKARTA - The collapse of Silicon Valley Bank is a race for Chinese startups, venture entrepreneurs and venture funds to find alternatives to provide financing.

In fact, US regulators have tried to prevent the banking crisis by ensuring all bank deposits are problematic.

Chinese startups and fund managers say they still want to move their money from SVB once they can. Some of them switched to larger US banks, while some Chinese lenders such as China Merchants Bank and Industry & Commercial Bank of China also rushed to fill the void.

The banks have offered account services similar to SVB, but it is difficult to break the dominance of US banks among China's early start-up startups, where SVB has been operating for more than two decades and has a local joint venture.

Since SVB is one of the few banks that makes it easier for beginners to open bank accounts for dollar financing, it is a foreign bank that is the dominant choice for young companies in China, advisors and company companies say.

"China Merchants Bank told us it could prepare an overseas account for us within a week," said one co-founder of the Hong-manded startup, describing how he has been offered a number of proposals by the bank, including Zheshang Bank. to resolve the problem with SVB.

CMB, ICBC and Zheshang Bank did not immediately respond to requests for comment.

On the evening of Sunday, March 12, US banking regulators moved quickly to support all deposits on SVB, which closed on Friday, March 10, eliminating concerns that startups would be struggling to pay their employees this week.

However, Wu Yujun, chief executive on Hangzhou-based start-up banking platform QBIT, said in the last three days it had received six times more questions about the creation of accounts as usual, mostly from SVB customers.

CB International Bank, a US-based bank that serves mainly small and medium-sized Asian companies, said it had been contacted by many new companies and US dollar funds looking to quickly open accounts so they could save the funds they had withdrawn, or plan to withdraw from SVB.

CB International Bank chairman Sam Su said the company also asked companies to consider converting their US dollar holdings into overseas RMB (reminbi) deposits to diversify risks.

Some venture funds say they are in confusion because SVB has certain advantages and is very friendly with early-stage startups.

"We are still looking for a bank that we can safely open an account for," said an executive at a Chinese venture capital fund with a deposit in SVB that declined to be named because he was not authorized to speak to the media.

"Not many banks are friendly to venture capital," he added.

China is home to thousands of new companies and venture capital investment is expected to recover gradually this year after funding in 2022 is hit by the country's zero-COVID policy, stock market slump, and US-China tensions.

"The withdrawal is the easiest option but there are no other bankers in the US to provide the level of service SVB normally offers," said an executive at a large Chinese investment bank, which has savings in SVB through its private equity unit, adding that the bank's priority is to own at least "some accounts" in the United States.

Going forward, "EACH person needs to prepare two accounts - one for domestic capital and another for foreign capital," said Stephen Chen, co-founder of Shanghai-based startup Lead Digital.

"But the market space left by SVB will be filled by the next bank, which is an opportunity," Chen said, whose company expects Sequoia Capital China and Wu Capital among its investors and banks with SVB.