Quantum industry has good and bad news as Silicon Valley banking storm sweeps through
Silicon Valley Bank (SVB), a leading bank serving the technology community, has collapsed and is under the control of the Federal Deposit Insurance Corporation (FDIC) with nearly $175 billion in customer deposits. The first $250,000 of a customer's deposit is covered by FDIC insurance, but there is no guarantee that any amount in excess of this will be reimbursed.
Silicon Valley Bank does have a lot of assets, but they are not liquid assets, and the FDIC will sell these assets to reimburse the non-insured amount, but this may take some time. So this will create a big hardship for some startups because they will not be able to withdraw cash to meet their day-to-day operational needs.
With the announcement of SVB's failure this week, Global Quantum Intelligence (GQI) has been conducting a quick survey on LinkedIn to help assess the impact on the quantum community. This time, the survey opened on Friday, March 10 and ran through the evening of Saturday, March 11; responses included major vendors, large startups and two groups of prominent freelancers, service providers, consultants and experts, and so far, partial interim results have been obtained.
1) 1 quantum tech hardware company and 1 small consulting firm indicated significant impact
2) 6 larger quantum technology startups all said they were marginally impacted
3) 45 companies said no, they are safe.
A total of 10 of the 20 leading startups in the space submitted responses, 3 of which said they were affected to some degree. One company said that while they do have significant capital tied up in SVB, they have a steady stream of customer revenue that they expect to cover their operations and allow them to operate as usual.
Thus, from a direct impact perspective, GQI's initial view is that while this situation may present some challenges for a few quantum companies, the quantum technology sector as a whole appears to have escaped the worst of times in terms of direct financial consequences.
What was not assessed in the survey, however, is how this will affect near-term venture investments. Many venture funds hold their cash reserves in SVB, and only one quantum technology investor responded to the GQI survey. If a venture capital firm that is considering a potential quant investment has cash tied up at SVB, they may have to delay the deal until the cash is released.
In addition, this situation may cause some investors to become more cautious while they wait and see what will happen to the overall economy.
There will certainly be more to come in the next week or so. Perhaps a large bank or some white knight in the form of a U.S. government program may come in and acquire or guarantee the assets and deposits of SVBs. But overall, the global quant ecosystem is very diverse, and GQI expects that the failure of SVBs will have minimal impact on the industry as a whole. However, if the problem spreads and more banks fail, it could create more widespread problems for the economy and the impact on quant could become more significant.
