The red indices dominated many global stock exchanges in the aftermath of the Silicon Valley bank collapse crisis, as the markets feared the effect of the “domino theory”, meaning the spread of a state of panic among depositors in many banks leading to the bankruptcy of a number of them, affecting the financial system in the strongest economy in the world.

And the witness is that the US market plunged by 2% on Friday, the tenth of March, in the worst day since the official end of the Corona pandemic was announced, heralding a storm in the stock market, and the anticipation of the majority of dealers for a new financial crisis emanating from the United States, and fears of the global financial crisis began to appear again. ..

What prompts questions about the impact of the crisis on startups in particular is the fact that the Silicon Valley Bank was called a “friend of startups”, and its collapse was preceded by the collapse of the “Silvergate” bank, which is involved in an expansion in digital currencies and startups in this field, followed by the collapse of a bank Signature, which is the 21st largest in the United States, was forced by Washington to close its doors.

In this context, the US authorities estimated the volume of “high-risk assets” or those that suffered large losses at about $750 billion, and the share of the giant “Merrill Lynch” bank is about $100 billion, which is a large number, but the most dangerous is that the size of some of the bad assets of some Banks are close to the size of the capital, although these banks are few, which gives some reassurance that some bankruptcies can be isolated from the negative impact on the rest of the financial scene.

Although the US authorities have not yet announced the results of their investigations into the bankruptcy of the three banks (Silvergate, Silicon Valley, and Signature), the odds indicate that none of them is related to investing in startups, the first deu to investment in digital currencies in particular, and the other two Because of what sources described as a “lack of transparency“.

Despite this, the odds indicate the impact of startups and their financing, and therefore a repeated phrase spread on the social media pages of many startups, the content of which is that “the company is in a solid financial position despite the existence of deposits in Silicon Valley” or another phrase: “the company has no contributions.” in the bankrupt bank”, in an attempt to reassure customers of the limited impact of the bank’s collapse on them (in what seems to some to be confirmation of the phrase that denying the negative is proof).

In the field of digital currencies, companies such as “Ripple“, “Panetra“, “Circle“, “Block Fi” and other leading companies in digital currencies are threatened with losing part of their deposits in the friendly bank, as they come from among the 32,000 small enterprises that have deposits. More than $250,000 in a bankrupt Silicon Valley bank.

The witness is that 90% of startup companies cannot complete two years, and half of them close their doors during the first year, and the first reason for nearly 80% of these companies to fail is the inability to provide adequate financing for the projects to be worked on, or to provide financing on bad terms that companies are unable to operate. with it.

And with the increase in risks related to startups before bankruptcies, due to the high interest rate on the one hand, and due to the uncertainty of the general economic landscape globally on the other hand, startups will suffer more in order to obtain financing through loans, participation, or through the “angel investor” ( Who adopts the idea of the company and pumps large investments in it to take it to a higher level).

Here, it should be noted that emerging companies in China are not venture capital, as is the case in the United States (mostly), but small and medium commercial and industrial companies that constitute the Chinese economy’s lever for growth, while the latter is the main growth tool for the global economy.

All in all, startups in the US have disclosed deposits of more than $4 billion and various credit facilities with the bank, compared to a much smaller volume in Europe at just $190 million, and estimates of roughly equal amounts in Australia, where the bankrupt bank is active.

“The bank is starting to run and the interbank market is under pressure,” says Damien Boye, chief equity strategist at Baringjoy investment bank in Sydney, noting that the only hope for start-ups is not to continue with the Fed’s policy of raising rates.

Regardless of whether or not the US Federal Reserve follows the “wishes” of many in the market not to raise interest (as expected by 50% of market participants, according to a survey), the Fed will have to balance in the short term its desire to restrict inflation using the interest rate tool and its attempt not to cause inflation. Crisis collapse of a new American bank.

As it is known, the collapse of “Silicon Valley” came because of its investment in US bonds, the value of the old stock of which had declined (before raising interest rates since March 2022), in addition to providing a return less than the interest rate granted by the bank to depositors.

Concern extends from this trend outside the United States. The Silicon Valley bank was operating in the European and Chinese economies as well (providing loans but not taking deposits), so a survey revealed that more than 50% of Chinese startups are concerned about the impact of its immediate collapse. And indirectly on the future business of these companies.

Although other banks do not have the same share of capital in the bond market as is the case for “Silicon Valley” (more than 50% in the bond market), but further leverage will lead to more losses for all US banks that invest percentages in bonds. And increases the pressure on the banking sector after the crisis of the collapse of “Silicon Valley”.

Regardless of what the “Silicon Valley” crisis will lead to (along with Silvergate and Signature) and its lack of direct connection with startups, the procedures and anxiety that will follow will limit the financing of these companies, and this may be a positive thing on the one hand by imposing more scrutiny on financing and avoiding uncalculated adventures However, it may cost the economy the cost of the lost opportunity by losing initiatives that may contribute to creating a state of prosperity that supports its rapid move towards the digital economy.