Following SVB Collapse, African Startups Are Switching To A Bank Founded By Nigerians

Following SVB Collapse, African Startups Are Switching To A Bank Founded By Nigerians

Key highlights

  • Startups in Africa looking for other banking options after SVB collapse are switching to Verto.
  • The London-based fintech said it is now onboarding 60 companies that were former clients of SVB.
  • However, Veto, which provides mainly cross-border payment services may not be able to meet up with other services provided to the startups by SVB.

African startups are switching to another payment enabler, Verto, after Silicon Valley Bank’s (SVB) collapse. The London-based B2B cross-border foreign exchange (FX) said it has already acquired a quarter of SVB customers from Africa and the MENA region.

Nairametrics earlier reported that some Nigerian startups operated bank accounts with SVB and were therefore caught up in the crisis until the US Fed offered to backstop all customer deposits.

These startups also operated bank accounts with the US and UK arms of the bank, especially those affiliated with the likes of YCombinator and Tech Starts.

Before its collapse, SVB was said to have about 250 startups from Africa and the MENA region, according to data from Verto, and out of these, Verto said it is onboarding 60 companies, which include Jumia and Chipper Cash.

However, Verto which primarily provides a cross-border platform that helps startups, SMEs and large corporates send, receive, and exchange may not provide other crucial services rendered to these companies by SVB. In its days, the collapsed bank provided startups with venture debt, credit cards, and term loans.

African startups targeted solutions

While noting that many African startups might not meet up with the conditions to open an account with a U.S. bank, co-founder and CTO Anthony Oduu, in a TechCrunch interview, said:

  • “Depositing money with U.S. banks is the most popular option for African startups but most of them rarely meet the conditions of doing so. Meanwhile, companies like us have simple banking solutions built and catered for startups based in Africa and other emerging markets.
  • “While we had been building this product, we recently launched in beta in light of these events where we’ve got an influx of demand from some startups and VCs. Customers can access up to 25 safeguarded accounts (holding different currencies) on Verto.”

Verto said it has extended these accounts to other international currencies regardless of the customer’s country of incorporation. The fintech company said it holds “designated safeguarding accounts” with accredited banks in the U.K.; neither the startup nor the banks can claim the funds in these accounts. Should it go insolvent for any reason, customers’ funds remain protected.

The Y Combinator-backed Verto was founded in 2018 by Oduu and Ola Oyetayo and the fintech has raised over $12 million from investors, including emerging markets-focused VC firm Quona Capital, Treasury (founded by Betterment’s Eli Broverman and Acorns’ Jeff Cruttenden) and Middle East Venture Partners (MEVP).

SVB collapse and African startups

Although the direct impact of the SVB collapse on African startups could be minimal in terms of the number of companies banking with SVB, stakeholders said it may result in less funding for African startups this year.

According to them, most investments into startups were financed by Silicon Valley Bank and its peers, and with the recent developments, VCs now face uncertainties that will make them withdraw and become less adventurous in investing.

SVB, before its collapse, was a strong partner with startup firms like incubator Y Combinator, which holds accounts from Africa and across the world. As a result of its collapse, about 30% of Y Combinator startups with SVB exposure were reportedly unable to make payroll.

About Verto Bank

According to information on its website, Verto is a global financial technology firm that enables businesses of all sizes to access enterprise-grade cross-border payments, FX, and banking solutions via our advanced platform or API.

Businesses can accept payments and send payouts globally in one single platform. Verto seamlessly connects any business, anywhere.

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