Silicon Valley Bank (SVB), the US’s sixteenth largest lender which is dealing with a collapse, has despatched out apprehensions the world over resulting from its doable monetary influence globally. The collapse is being termed as the largest financial institution failure after the worldwide monetary disaster in 2008-09. As the SVB was a go-to financial institution for tech startups, the very fact induced worries in India about its doable influence on startups right here. Experts, nonetheless, stated SVB has a small presence in India. But, Indian software-as-a-services (SAAS) startups with operations within the US will get affected.
Which Startups Have Exposure To Silicon Valley Bank?
Many Indian start-ups funded by enterprise capitalists, together with Accel, Sequoia India, Y Combinator and ComfortableBank, have used SVB as their banking accomplice. Among the Indian companies receiving cash from S V Bank are Loyalty Rewardz, Bluestone, and Carwale.
Y Combinator, which is the one having main influence, additionally has funding in enterprise capital agency 9Unicorns. Y Combinator has additionally incubated startups comparable to Khatabook, Zepto and OkCredit.
Other startups can also have oblique funding or deposit publicity of SVB.
Expertspeak: How Much Is The Risk of SVB Crisis For Startups In India?
Shashank Randev, co-founder of 100X.VC, stated, “For startups having Indian holding constructions — it shouldn’t have any impact, as most of their capital lies in Indian banks. Also, the US Department of treasury, Federal reserve and FDIC made a press release that depositors could have entry to all of their cash beginning Monday, March 13. No losses related to the decision of Silicon Valley Bank can be borne by the taxpayer.”
Though depositors will have access to their money from Monday, March 13, Girish Bhise, founder and CEO of ValueAdd Research and Analytics, said that as 96 per cent of deposits are not protected by the FDIC’s reimbursement guarantee, the collapse of Silicon Valley Bank has a significant impact on international VCs and businesses that receive funding.
He said the SVB crisis is unlikely to have any impact on the funding sentiments. “Also, the overall US banking system remains liquid and strong.”
Stating that startups in India are unlikely to be instantly impacted by the SVB disaster, Prerna Kalra, CEO and co-founder of Daalchini Technologies, stated SVB has a small presence in India and focuses totally on providing banking providers to expertise and life science enterprises there.
“However, the Indian software-as-a-services startups with operations within the US will get affected,” he said, adding that SVB’s crisis could indirectly affect Indian startups in a few ways including investor confidence, increased scrutiny, and increased competition among banks.
HSBC-Silicon Valley Bank UK Deal: Is It Helpful for Starups?
The UK government and HSBC has 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.
As a number of startups have reliance on Silicon Valley funding, Lallit Tripathi, chairman and managing director of Vedant Asset, said, “This (the deal) will be a big positive for the tech start-up community. The move would also be positive for the Indian start-up ecosystem.”
Is There Any Futher Opportunities for Similar Rescue Deals?
ValueAdd Research’s Bhise stated there’s a good likelihood that established banks might provide to buyout SVB.
HSBC UK Bank plc has purchased Silicon Valley Bank UK Limited for £1. It had loans of round £5.5 billion and deposits of round £6.7 billion as on March 10, 2023. The property and liabilities of the guardian firms of S V Bank UK are excluded from the transaction.
Bhise stated talks between banks like Bank of London Group Ltd. and Royal Group of Abu Dhabi are already underway. Elon Musk has additionally indicated curiosity in shopping for the financial institution.
“We don’t assume it may be utterly dominated out that the affected VCs with relationship with S V Bank would come to its rescue, as they’ve a powerful vested curiosity. The purchaser should, nonetheless, present immediate liquidity to satisfy depositors’ requests and safeguard the pursuits of its collectors and shareholders. To be certain that there aren’t any extra banks sitting on the verge of failure like SVB and Signature Bank, the US authorities has a number of work to do,” he stated.
The collapse of Silicon Valley Bank, also know as SVB, is being termed as the biggest bank failure since the crisis at Washington Mutual in 2008 or the global financial crisis. This was the 16th biggest lender in the US and was the go-to bank for several startups across 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 pulling out their deposits, creating a run on the bank. The SVB collapse led investors to speculate that the Fed would now hesitate to hike interest rates by a super-sized 50 basis points this month.
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