The authorities in California shut down Silicon Valley Bank (SVB) due to a liquidity crisis that caused customers to withdraw their funds. This event has caused concern among UK startups that have accounts with SVB's UK subsidiary, as it is the largest bank failure since the 2008 financial crisis. However, SVB UK has stated that it is still conducting business as usual, processing payments and funding loans for its UK clients. It should be noted that SVB UK is a distinct entity from its US parent company, which experienced the bank closure.

SVB UK has declared that it is an autonomous and self-regulating bank in the UK, and its funds are isolated from its US parent company and other branches. Nonetheless, some UK startups have still chosen to withdraw some of their funds from SVB UK, which has resulted in founder WhatsApp groups discussing the degree to which they should diversify their cash away from the bank. 

To assuage these concerns, Erin Platts, CEO of SVB UK, reassured investors in a Zoom call that the bank is still functioning and doing its utmost to support them. However, she was unable to share information about the bank's financials or the business's future beyond the coming week. Some investors have reported widespread panic among startup circles, leading them to actively withdraw their funds from SVB UK, although they are unsure if this response is justified. In response, Francesco Perticarari, a general partner at Silicon Roundabout Ventures, advises startups to be cautious and to diversify their funds in a separate account with one to two months' runway.

On Thursday, the US parent company of SVB suffered a massive decline of more than 60% in its share value after announcing the sale of nearly $2bn worth of stocks to cover losses incurred by the sell-off of its bond portfolio. As a result, US investors recommended that startups withdraw their funds from the bank, which triggered a run on the bank after it was unable to satisfy all withdrawal requests. SVB has previously stated that it provides accounts for 50% of US startups. 

On Friday evening, the US Federal Deposit Insurance Corporation (FDIC) took over deposits at SVB. The banking crisis has also impacted other major banks, with Barclays, Lloyds, and HSBC experiencing a 3-5% drop in their share prices. SVB has been in the UK market since 2004 and has amassed a portfolio of 51 firms, including well-known startups such as Wise, Paddle, Wagestream, and Plum, through its London-based subsidiary, reflecting its extensive presence in the UK tech industry.

The Bank of England released a statement on Friday evening stating that it would be putting SVB UK into insolvency. The statement declared that customers would be reimbursed up to £85,000 through the compensation scheme as soon as possible, while the other assets would be liquidated to pay SVB UK's creditors whatever cash could be obtained.

Over 200 entrepreneurs of UK startups have written to Chancellor Jeremy Hunt expressing their concerns that the insolvency of SVB UK presents a significant risk to the existence of the UK tech industry. The sudden collapse of SVB has left numerous UK tech startups without access to funds, and while most deposits are secured up to £85,000, or £170,000 for joint accounts, according to Prudential Regulation Authority protections, tech founders are now seeking funds to pay suppliers and make payroll. The letter's signatories informed the chancellor that many of them are calculating whether they may potentially become insolvent.