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Travel technology start-ups are not expected to face long-term financial problems following the sudden collapse of US-based Silicon Valley Bank (SVB).
Analysts following the travel tech industry said that affected start-ups might have some short-term financial issues but the danger of longer-term implications has eased following moves by governments and regulators in the US and UK.
SVB became the second-largest bank failure in US history when the Federal Deposit Insurance Corporation (FDIC) took control of the bank on Friday (10 March) after a “run” on deposits by worried clients looking to withdraw their cash. SVB primarily worked with tech start-ups in the US and UK.
The UK government and financial authorities moved quickly to sell SVB’s UK division to banking giant HSBC for £1 on Monday (13 March).
The Bank of England said in a statement: “The Bank and HM Treasury can confirm that all depositors’ money with SVBUK is safe and secure as a result of this transaction. SVBUK’s business will continue to be operated normally by SVBUK.”
The US Federal Reserve has also announced an emergency lending programme with president Joe Biden telling Americans that its banking system remained “safe”.
Meanwhile the European Commission said that SVB had a “very limited presence” in the EU, but it was “in touch with the relevant competent authorities”.
Travel Tech Consulting president and founder Norm Rose said SVB’s collapse led to a “real scramble” for Silicon Valley companies.
“Any time you can’t withdraw your money from an institution, the money that’s your profits or your customers’ money, that’s a real problem, especially on the latter part,” said Rose.
Several travel tech providers provided assurance over the weekend that their operations would continue.
Navan, which was formerly known as TripActions before its recent rebrand, said in a statement that SVB was a “longstanding financial partner and customer” since the company’s inception but that “Navan’s financial position remains strong” following the bank’s closure.
“Less than 5 per cent of our liquid assets were held by SVB,” said Navan in its statement. “We have a robust network of financial partners, including Goldman Sachs, Citibank and Bank of America and do not rely solely on SVB to provide our services.”
Virtual card payment start-up Teampay said on Twitter that it “sees no risk to operations” despite its partnership with SVB, as it keeps its funds with other institutions.
Sonder Holdings in a statement said it was “actively [monitoring] the evolving situation” with SVB. The short-term accommodation provider said, as of March 9, it had about $2 million in an operating cash account and about $20 million in deposit accounts with SVB as well as a $60 million line of credit facility.
Some companies, including American Express Global Business Travel and AI software provider Pros, submitted filings with the US Securities and Exchange Commission (SEC) to inform investors that they do not have cash deposits or securities with SVB.
Beyond the travel tech industry, the collapse also hit companies that relied on accounts with SVB to pay expenses.
In its statement, Navan advised clients with payment accounts linked to SVB to switch to another account to avoid disruptions to bookings.
New TMC TakeTwo said its US operations team also worked over the weekend to assist clients using SVB payment tools, including healthcare management platform Intelycare.
IntelyCare corporate travel manager Tricia Jenkins, in a statement provided by TakeTwo, said the situation disrupted both the company’s direct-bill card and individual corporate cards. Working with TakeTwo, it was able to update its online booking tool and get alternative payment tools in place “within hours”.
Chris Thelen, CEO of TakeTwo, added: “Our out-of-hours team stepped in immediately to support our US clients who have been impacted by the SVB situation, and ensure that alternative solutions were put in place for travellers to cover travel payments.”
While US authorities took control of a second bank, New York-based Signature Bank, on Sunday (12 March), Travel Startups Incubator (TSI) managing partner Matt Zito said the actions taken by financial regulators have likely prevented the “contagion” that would lead to more bank failures.
“Everyone’s going to get their money out of SVB, and the lending facility will backstop anything more that comes down the pike,” said Zito. “Ultimately, this will blow by, and in a month we probably won’t even be talking about it.”
Travel Tech Consulting’s Rose also expressed confidence in the future of travel tech start-up investments.
“Even in the worst of times, investment comes back, and innovation comes back, and that’s a great testimony in the way of the American economy,” said Rose. “If this is pointing to some strain in the short-term, in the medium and long-term, things will be fine.”
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