Silicon Valley Bank (SVB), the US’s 16th largest lender, is facing collapse, sending fears across the world due to its potential financial impact globally. The collapse is being called the biggest bank failure since the global financial crisis in 2008-09. Since SVB was a go-to bank for tech startups, this fact raised concerns about its potential impact on startups in India. However, experts say that SVB has very little presence in India. But, Indian software-as-a-services (SaaS) startups, which have their operations in the US, will be affected.
Which startups have exposure to Silicon Valley Bank?
Several Indian start-ups funded by venture capitalists including Accel, Sequoia India, Y Combinator and SoftBank have used SVB as their banking partner. Indian businesses that have received funding from SV Bank are Loyalty Rewardz, Bluestone and CarWale.
Y Combinator, which has a major influence, also has investments in venture capital firm 9Unicorns. Y Combinator has also incubated startups like Khatabook, Zepto and OkCredit.
SVB may also have indirect investment or deposit exposure in other startups.
Experts Speak: How Risky Is The SVB Crisis For Startups In India?
Shashank Randev, co-founder of 100X.VC, said, “For startups with Indian holding structures – this should have no impact, as most of their capital is vested in Indian banks. In addition, the US Department of Treasury, Federal Reserve and FDIC made a statement that depositors will have access to all their money starting Monday, March 13. Any losses associated with the Silicon Valley bank’s resolution will not be borne by the taxpayer.
Although depositors will have access to their money starting Monday, March 13, Girish Bhise, founder and CEO of ValueAdd Research & Analytics, said that since 96 percent of deposits are not protected by the FDIC’s reimbursement guarantee, the Silicon Valley bank has collapsed. A significant influence on international VCs and businesses seeking funding.
The SVB crisis is unlikely to have any impact on funding sentiment, he added. “Moreover, the overall US banking system remains liquid and sound.”
Stating that startups in India are unlikely to be directly affected by the SVB crisis, Prerna Kalra, CEO and co-founder of Cinnamon Technologies, said that SVB has a small presence in India and provides banking services mostly to technology and life sciences enterprises. focuses on doing. ,
“However, Indian software-as-a-service startups with operations in the US will be affected,” he said, adding that the SVB crisis may indirectly affect Indian startups in a few ways, including loss of investor confidence, increased scrutiny and There is an increase in competition between Banks.
HSBC-Silicon Valley Bank UK Deal: Is It Helpful For Startups?
The UK government and HSBC have announced that the UK branch of failed US lender Silicon Valley Bank has been sold to HSBC for a nominal £1 in a rescue deal.
Since many startups depend on Silicon Valley funding, Vedanta Asset Chairman and Managing Director Lalit Tripathi said, “This (deal) will be a big positive for the tech start-up community. The move will also be beneficial for the Indian start-up ecosystem.” will be positive.”
Are there any other opportunities for similar rescue deals?
Bhise of ValueAdd Research said there is a good chance that established banks may make an offer to buy SVB.
HSBC UK Bank plc has bought Silicon Valley Bank UK Ltd for £1. It had loans of approximately £5.5 billion and deposits of approximately £6.7 billion as of March 10, 2023. The assets and liabilities of the parent companies of SV Bank UK are excluded from the transaction.
Bhise said talks are already underway between banks such as the Bank of London Group Ltd and the Royal Group of Abu Dhabi. Elon Musk has also shown interest in buying the bank.
“We do not think it can be completely ruled out that the affected VC having links with SV Bank will come to its rescue, as he has a strong vested interest. and provide quick liquidity to protect the interests of shareholders. The US government has a lot of work to do to ensure that no more banks like SVB and Signature Bank are on the brink of failure,” They said.
The collapse of Silicon Valley Bank, also known as SVB, is being called the biggest bank failure since the 2008 Washington Mutual crisis or the global financial crisis. It was the 16th largest lender in the US and the go-to bank for many startups around the world.
The bank failed after clients – many of them venture capital firms and VC-backed companies that the bank had cultivated over time – began withdrawing their deposits to make a run on the bank. SVB’s collapse prompted investors to speculate that the Fed would now hesitate to hike interest rates this month by a super-size of 50 basis points.
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