March 14, 2023: -The Silicon Valley Bank failure has had ripple effects on Chinese startups, especially those backed by U.S. dollar-denominated funds.

On Friday, U.S. regulators shut down the bank in the country’s second-biggest banking failure. Silicon Valley Bank did its business by supporting tech startups, which include those from China.

The online system which opens an account at SVB had permitted the use of a Chinese mobile amount for verification, according to one Chinese tech startup founder who wants anonymity due to the sensitive nature of the situation. The source highlighted that they had tens of millions of U.S. dollars at SVB.

He’s since moved most funds out but said he still had over $250,000 at SVB.

Along with the support of a mainstream venture capitalist, a beginning could open an account at SVB within seven days, the source said in Mandarin. “Mainstream traditional banks, such as Standard Chartered, HSBC, and Citi, have strict compliance, and starting a bank account with them takes a long time. It can take up to 3-6 months,” he said.

The source, who founded a fintech firm and two other tech companies, said venture capitalists liked working with SVB because the bank allowed the investors to experience and approve how the startups used their funds.

“If there will be no SVB, it will harm the tech industry because there is no other bank which allows these two features,” the source said, referring to the speedy account starting for startups and visibility for venture capitalists.

Having a bank account with SVB permitted China-based startups to tap funding from U.S.-based investors with an eye to the public, which offers in the U.S. Regulatory pressure from Beijing and Washington, D.C., has restricted the development of that China-to-U.S. IPO pipeline in the last two years.

It needed to be made clear how many China-based startups had SVB accounts. Therefore, the source noted much China-based, beginning with U.S. VC funding, has tended to begin with bank accounts at SVB.

Shanghai-based biotech firm Zai Lab said that as of December, nearly 2.3% of its $1.01 billion in cash and cash equivalents were conducted at SVB. Most were at JPMorgan Chase, Citigroup and Bank of China, Zai Lab stated.

Another biotech company, Everest Medicines, stated it had less than 1% of its cash at SVB and anticipates recovering many of its deposits at the bank through the U.S. Federal Deposit Insurance Corporation.

The FDIC stated insured depositors could access their deposits by local Monday morning. Its standard insurance covers $250,000 per depositor, each bank, for each account ownership category.

Therefore, most stakes held by SVB were uninsured. The FDIC said uninsured depositors would get receivership credentials for their balances.