Auto industry startups were already struggling to access new capital before the March 10 collapse of Silicon Valley Bank, an influential player in the country's innovation economy. Its demise could make those problems even worse.
Accessing fresh funding for growth is an existential need for startups. Financing is required to mature from vulnerable infancy to stability and, hopefully, success. Without it, the end is all but certain unless a larger player or well-funded rival steps in as a savior. Self-driving truck company Embark Technology, for example, couldn't raise new capital, laid off hundreds of workers and now faces liquidation. Argo AI, another autonomous technology company, closed in October after backers Ford Motor Co. and Volkswagen Group pulled the plug.
Ripples from the bank's collapse are already affecting the auto tech sector.
The cost of capital will be higher for auto tech and battery startups, Martin French, managing director at German auto industry consultancy Berylls Strategy Advisors, told Automotive News, while venture capital firms will be shrewder with their investments.
"The industry still needs these startups, they still need these companies to be well-funded in terms of the transition to electrification," French said. "It's just a question of whether or not the relationships are going to be there with other banks, with the VCs, to be able to help startups and give the startups what they need."