SVB collapse: How exposed are African start-ups?

The recent collapse of Silicon Valley Bank (SVB) due to inadequate liquidity and insolvency has ignited concerns regarding the potential impact on African start-ups and their access to funding. SVB has been a key financial institution catering to the tech industry, specifically start-ups and venture capitalists. Gbite Oduneye, the General Partner at ODBA, shed some light on the situation in a recent interview on CNBC Africa. Oduneye highlighted that the exposure of African start-ups to SVB was relatively limited, with few companies actually banking with the institution. This limited exposure has shielded African start-ups to some extent from the repercussions of the bank's failure. The collapse of SVB has left a void in the innovation ecosystem, raising questions about the future of funding and innovation, not only in America but also globally, including Africa. It has triggered uncertainty and shockwaves in financial markets worldwide. The impact on Africa's start-up ecosystem could be significant, considering that a substantial portion of funding for African ventures comes from North America, with SVB playing a key role in facilitating such investments. Oduneye highlighted a recent report from Africa The Big Deal, indicating that a significant percentage of investments in Africa over the past few years originated from North America. The loss of a major player like SVB could lead to a reduction in funding inflows to the continent and potentially result in a shift in investor priorities and interests. This could manifest in fewer funding opportunities, delays in capital allocation, and a potential rise in mergers and acquisitions within the start-up space. Although the collapse of SVB has created uncertainty, some positive developments are also anticipated. The education and awareness surrounding African innovation have increased in recent years, potentially attracting more investment from within the continent itself. While foreign capital has played a crucial role in financing African tech and innovation ventures, Oduneye emphasized that the continent's dependence on foreign funding is not unique to the tech industry. Various sectors in Africa, including banking, telecom, and energy, have also relied heavily on foreign capital for growth and development. Despite the challenges posed by the collapse of SVB, Oduneye remains optimistic about the resilience and potential of the African innovation ecosystem. He pointed out that as the tech industry matures and evolves, the reliance on foreign capital is expected to diminish gradually, with African investors and funding sources playing a more significant role in driving innovation and growth. The interconnected nature of the global economy underscores the importance of diversifying funding sources and building a robust ecosystem that can withstand external shocks. While the collapse of SVB has raised concerns and uncertainties, it has also sparked discussions on the sustainability and resilience of African start-ups and the broader innovation ecosystem. The evolving landscape presents both challenges and opportunities for African entrepreneurs, investors, and stakeholders to navigate and capitalize on the changing dynamics of the funding environment.