SVB's collapse likely to adversely impact Indian startups

The collapse of Silicon Valley Bank, the largest vendor in the startup ecosystem, is likely to adversely impact the Indian startup scenario as well as it has injected a lot of uncertainty in the sector overnight, industry experts say.

"Hopefully the matter will get resolved, but I think it is a big hit for Indian startups," Ashu Garg, a prominent Silicon Valley-based venture capitalist and early-stage investor for over two decades,said in an interview.

California-based Silicon Valley Bank (SVB), the 16th largest bank in the United States, was closed on Friday by the California Department of Financial Protection and Innovation which later appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver.

The FDIC, in a statement, said as of December 31, 2022, the Silicon Valley Bank had approximately USD 209.0 billion in total assets and about USD 175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The number of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

"The reality is that the Silicon Valley Bank has been a real supporter of the Indian startup scene and has provided banking services. Most Indian startups that do business in the US use this bank because it is one of the few institutes willing to work with the Indian banks. A lot of the banking institutes do not want to work with overseas customers," Garg, an alumnus of IIT Delhi, said.

"So, SVB has been able to work with the Indian companies that do not have US employees. So if they (are gone), it will be very problematic for the Indian (companies)," he said in response to a question.

Over the past several years, SVB has been one of the most preferred choices of banking for startups and tech industry in the Silicon Valley, mainly because of its understanding of the industry and flexibility in many aspects suiting the startup ecosystem.

Given that every third startup in the Silicon Valley is founded by Indian-Americans, experts feel a significantly large number of these founders would be impacted as early as next week in terms of even making basic payments and giving paychecks to their employees.