Silicon Valley Bank (SVB), the 16th largest US lender, is on the brink of collapse, sparking worldwide concern over its global financial impact. The collapse is being called the biggest bank failure since the global financial crisis of 2008-09. Since SVB is a bank for tech startups, this fact has raised concerns about its impact on startups in India. According to analysts, SVB has a small presence in India. But Indian software-as-a-service (SAAS) startups operating in the US are suffering.
What Startups Are Impacting Silicon Valley Bank?
Many Indian startups funded by venture capitalists including Accel, Sequoia India, Y Combinator and SoftBank have used SVB as their banking partner. Indian businesses that receive money from SV Bank include Loyalty Rewardz, Bluestone and Carwale.
The influential Y Combinator has also invested in venture capital firm 9Unicorns. Y Combinator has also incubated startups such as Khatabook, Zepto and OkCredit.
Other start-ups may also be affected by indirect investment or SVB deposit.
Expertspeak: How risky is the SVB crisis for startups in India?
Shashank Randev, founder of 100X.VC, said, “For startups with Indian holding structures, this should not have any impact as most of their capital is in Indian banks. The US Department of the Treasury, the Federal Reserve and the FDIC also announced that beginning Monday, March 13, depositors will be able to access all their money. No cost to the taxpayer will be borne by Silicon Valley Bank’s decision.”
Although depositors will be able to access their money starting Monday, March 13, Girish Bhise, founder and CEO of ValueAdd Research and Analytics, spoke of the collapse of the Silicon Valley bank because 96 percent of deposits are not protected by the FDIC’s indemnification guarantee. significant impact on international VCs and businesses receiving funding.
According to him, the SVB crisis is unlikely to affect the mood of financing. “At the same time, the overall US banking system remains liquid and strong.”
Stating that startups in India are unlikely to be directly affected by the SVB crisis, Prerna Kalra, CEO and founder of Daalchini Technologies, said SVB has a small presence in India and focuses mainly on providing banking services to technology and life science businesses. .
“However, Indian software-as-a-service startups operating in the US will suffer,” he said, adding that the SVB crisis could indirectly affect Indian startups in several ways, including investor confidence, increased scrutiny and increased competition. banks.
HSBC-Silicon Valley Bank UK Deal: Is It Good for Startups?
The UK government and HSBC have announced that the UK arm of failed US lender Silicon Valley Bank has been sold to HSBC for a nominal £1 in a rescue deal.
With a number of startups relying on Silicon Valley funding, Lallit Tripathi, chairman and managing director of Vedant Asset, said, “This (deal) will be a huge positive for the tech startup community. This move would also be positive for the Indian startup ecosystem.”
Are there other opportunities for similar salvage deals?
Bhise of ValueAdd Research said there is a good chance that established banks could offer to buy SVB.
HSBC UK Bank plc has acquired Silicon Valley Bank UK Limited for £1. As of 10 March 2023, it had approximately £5.5 billion in loans and approximately £6.7 billion in deposits. The assets and liabilities of SV Bank UK’s parent companies are not included in the transaction.
According to Bise, Bank of London Group Ltd. and negotiations are already underway with banks such as Royal Group of Abu Dhabi. Elon Musk also expressed interest in buying the bank.
“We think it cannot be completely ruled out that distressed VCs with ties to SV Bank will come to its rescue as they have strong vested interests. However, the buyer must provide prompt liquidity to meet the demands of depositors and protect the interests of creditors and shareholders. “The U.S. government must do more to ensure that other banks like SVB and Signature Bank do not fail,” he 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 was the primary bank for several startups around the world.
The bank failed after clients – many of whom were venture capital firms and VC-backed companies the bank over time – started working for the bank and withdrawing their deposits. SVB’s decline has led investors to speculate that the Fed will hold back on raising interest rates by a super-sized 50 basis points this month.
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