The effect of the closure of Silicon Valley Bank (SVB) is being seen rapidly across the world. Not only are startup founders, chief executive officers (CEOs) and investors working together to find solutions to this crisis, but governments are also springing into action.
Minister of State for Electronics and IT, Rajeev Chandrasekhar said in a tweet, “The closure of Silicon Valley Bank is definitely going to create trouble for startups around the world.” Startups are an important part of the economy of New India. I will be meeting people from Indian startups this week to assess its impact and try to find out how the government can help them in this time of crisis. He assured that the government will not let the SVB crisis affect the growth of Indian startups.
It is understood that the Ministry of Electronics and Information Technology may also hold a meeting with its Consultative Group on E-Commerce and Cyber Laws to discuss the issue.
Earlier, the UK government had said that it was trying to minimize the damage to the tech sector. According to media reports, Britain’s Finance Minister Jeremy Hunt while talking to a news channel said, ‘We will bring plans very soon to ensure that people can meet their cash needs and pay salaries to employees. ‘ It has been said in the report that this statement has come after the meeting of British Prime Minister Rishi Sunak, Finance Minister and Governor of Bank of England.
Meanwhile, US regulators on Monday scrambled to sell off the bank’s assets and provide account holders with a share of uninsured deposits.
Concern has increased in India about the SVB crisis and its impact. However, it is not clear how many Indian startups have money in SVB. But there are at least 1,000 startups out there, according to various industry sources.
Nazara Technologies said in a regulatory filing that two of its subsidiaries – Kidopia and Mediaworks have cash deposits of about Rs 64 crore with SVB. The company said in a statement, “Both subsidiaries are adequately capitalized and have stable cash flows and profits.” Hence, we do not anticipate any impact on day-to-day operations from the SVB developments.
Many domestic startups backed by venture capital such as Sequoia India, Essel, Y Combinator and SoftBank have accounts with SVB, say people in the know. SVB is the lead bank for Indian SaaS startups and Y Combinator-backed firms that have opened and raised early-stage capital in the US.
Info Edge founder Sanjeev Bikchandani told BLiTZ, “About 15 to 20 per cent of venture capital-backed startups outside India have their money parked in Silicon Valley banks. These will also include startups that have moved out of India or have subsidiaries abroad.
Bikchandani said that the solution should be at both the global and local levels. He said, “All the domestic startups that Y Combinator has invested in have received investment through SVB and also have a banking relationship with SBV. There are hundreds of such startups and some of our best startups are among them. Startups that have investments in SVB may be at risk.
However, Y Combinator-backed Zepto, Meesho and Razorpay have claimed that they have no investment in SVB. Experts say that small and early-stage startups will be hit the most. A Razorpay spokesperson said, “The company has small amounts of money in several US banks. We do not have any deposits in Silicon Valley Bank.
Around 40 Indian startups with investments from Y Combinator have deposits ranging from $2.5 million to $1 million in SVB. According to data from Y Combinator’s founders’ WhatsApp group, more than 20 startups have more than $1 million in SBVs.
Y Combinator’s President and CEO Gary Tran has called the collapse of SVB a startup extinction-level event. He tweeted, ‘The money of 30 percent Y Combinator companies is deposited in SVB, which will not be able to pay salaries in the next 30 days.’
An e-mail was sent to Y Combinator for further information but did not get revert till the time of going to press.
Rahul Khanna, Co-Founder and Managing Partner, Trifecta Capital, said, “SVB is the natural bank for the small startup investing in Y Combinator. SVB was a startup friendly bank. Although big startups are not much dependent on SVB. He said that it will not have much impact on his portfolio companies.
