As the Canadian tech sector contends with the fallout associated with the collapse of Silicon Valley Bank (SVB), a group of nearly 30 Canadian tech leaders from across the country are calling upon the Government of Canada to step in and nip a potential liquidity crisis in the bud.
“The tech and innovation ecosystem is fragile, and if there is a liquidity crisis, it will quickly turn into a full-blown crisis,” reads a letter shared with BetaKit.
The letter’s signatories include tech leaders from across Canada, including CVCA CEO Kim Furlong, Communitech CEO Chris Albinson, BC Tech Association CEO Jill Tipping, and Volta CEO Matt Cooper, and 23 others. The group has sent the letter to political leaders, including Deputy Prime Minister of Canada and Minister of Finance Chrystia Freeland.
“The failure of SVB and the resulting collapse in investor confidence has created a crisis in liquidity for Canada’s tech sector well beyond SVB at precisely the time it was already extremely vulnerable,” the letter states.
To address this issue, the letter’s signatories are asking that the federal government lean largely on existing funded programs to inject more liquidity into the ecosystem.
The group is recommending four actions: “immediately extend” a second $300 million CAD Bridge Financing Program through BDC; accelerate deployment of the approximately $200 million fund-of-funds Venture Capital Catalyst Initiative (VCCI); accelerate deployment of the $200 million EDC has allocated towards investments; and for EDC to guarantee secured loans from other Canadian banks bridging SVB deposits or loans companies may have.
According to the letter, this $700 million injection of liquidity “would be felt quickly and provide immediate relief and investor confidence in the Canadian venture landscape, without any net new investments.”
The letter also outlined three areas where the group claims the SVB collapse is having the most impact. It stated that approximately 10 percent of Canadian companies doing business with SVB are directly impacted, with several that have “significant exposure” and are at risk of being unable to make payroll this week.
The group also argues that what is happening with SVB has the potential to create a liquidity crisis in a sector that is already “fragile.” And that given Canada’s proximity to the United States, “the current downturn in the US capital markets will directly affect Canadian companies disproportionately and will put Canadian companies at greater risk of failing.”