Collapse of Silicon Valley Bank to impact Indian startup ecosystem: Experts
By Team Newsable | First Published Mar 12, 2023, 9:45 AM ISTA large number of Indian startups which do not have even an employee or an office in the US had opened up their accounts in the Silicon Valley Bank as it let them do so without much regulatory questions and with a customer-friendly approach.
The collapse of Silicon Valley Bank (SVB), the largest vendor in the startup ecosystem, is likely to impact the Indian startup scenario as it has injected a lot of uncertainty in the sector overnight, industry experts say.
Speaking to a news agency, Ashu Garg, a prominent Silicon Valley-based venture capitalist and early-stage investor for over two decades said, "Hopefully the matter will get resolved, but I think it is a big hit for Indian startups."
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On Friday, the California-based Silicon Valley Bank (SVB), the 16th largest bank in the United States, was closed by the California Department of Financial Protection and Innovation which later appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver.
In a statement, the FDIC 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.
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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.
Similarly, a large number of Indian startups which do not have even an employee or an office in the US had opened up their accounts in the Silicon Valley Bank as it let them do so without much regulatory questions and with a customer-friendly approach.
A group of Silicon Valley-based venture capitalists after a meeting to discuss the aftermath of the bank's downfall said the events that unfolded over the past 48 hours have been deeply disappointing and concerning.
"In the event that SVB was to be purchased and appropriately capitalised, we would be strongly supportive and encourage our portfolio companies to resume their banking relationship with them," it said in a joint statement released by Indian-American Navin Chaddha, an early stage investor.
"SVB has been an early partner for many of our companies at Battery Ventures through the ups and downs of company building. The last 48 hours unfolded in ways we could have never imagined, but now is the time to back our partners and we strongly support our companies working with SVB as and when we have more clarity on their path forward," he said.
Meanwhile, Indian-American Rohit Chopra, the director of the Consumer Financial Protection Bureau, is tasked with protecting the consumers interest in the case. He is also one of the FDIC directors.
(With inputs from PTI)
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