New Delhi: Most Indian software-as-a-services startups are present in the US and firms affiliated with incubator Y Combinator are among the entities that will feel the heat of the Silicon Valley bank collapse, but the impact is likely to be short-lived. For various industry players and experts. Y Combinator-backed startups get their payments in their account at SVB, but several Indian firms associated with incubators like Meesho and Razorpay were able to withdraw their money from the bank in time.
Other Y Combinator incubated startups such as Khatabook, Zipto and OkCredit did not respond to queries sent regarding SVB collapse risk. Venture capital firm 9Unicorns, in which Y Combinator is an investor, also did not respond to the query. Eklavya Gupta, founder and CEO of fintech firm Raker Club, told PTI that there are some sizable non-Y Combinator-linked SaaS companies in the west coast with operations in the US and India, which have significant investments in SVB.
Gupta said, “We are helping startups to open their account in GIFT City. We have a good partnership to help large companies meet their urgent need. There is better management and resources available to manage.” Recur Club has set up a pool of USD 15 million to help Indian entities meet their immediate spending requirement and capex payroll without diluting their equity.
SVB was deeply entrenched in the tech startup ecosystem and the default bank for many high-flying startups; Its sudden downfall is one of the biggest bank failures since the global financial crisis of 2008.
Industry watchers expect a quick takeover of the bank as it has substantial assets that can be liquidated to return money to customers. Abhay Singhal, co-founder of SoftBank-backed InMobi Group, which is based in Palo Alto, said the loss of USD 1.8 billion in the sale of securities at mark-to-market prices spooked the market.
“The collapse of SVB will have a short-term impact on funding of startups. All new funding is likely to stop as venture capitalists will opt to save existing investments and I think they will be forced to reduce the valuation of their investments Due to this crisis, the capital issue is not going to last long, I Singhal said. InMobi has said that it never had any contact with SVB.
Singhal said that in the coming week someone or the other will revive the bank as it has a very impressive list of customers.
Singhal said, “It is going to be an issue around startups not being able to meet payroll in the short term. The problem I see is the short-term liquidity of around USD 7-8 billion that is tied to their assets. Will unlock and resolve this issue.” , As of December 31, 2022, on a consolidated basis, SVB had total assets of USD 211.8 billion, total investments in securities of USD 120.1 billion, total debt at amortized cost of USD 74.3 billion, total deposits of USD 173.1 billion and total SVB Financial shareholders’ equity USD 16 billion.
Y Combinator co-founder and CEO of Indian startup Snazzy, Ayush Pateria said most of the Indian startups incubated at Y Combinator that SVB has been exposed to are in their early stages. “Most of them, including us, have less than USD 250,000 in SVB accounts that are fully insured. The rest of the startups are expected to receive a portion of their deposits in the coming weeks. There are also more assets than the money owed to depositors, which will be sold over time to return the money. It is not a doomsday for firms, although it has a painful short-term impact,” Patria said.
Indian unicorns Meesho and Razorpay say they have nothing to do with America’s second biggest banking failure. Meesho’s chief financial officer Dhiresh Bansal said, “Meesho is not affected by the closure of SVB. On the day of closure of SVB, we did not have any outstanding deposits or other exposures in SVB.” A Razorpay spokesperson said the company has a limited amount of funds held at several banks in the US. “At this point in time, we have no contact with Silicon Valley Bank,” the spokesperson said.
Razorpay said it has created a dedicated Razorpay desk to help fellow startups make instant money transfers from their US banks to India. A leading investment firm, whose portfolio includes some of the leading Indian unicorns, said on condition of anonymity that it had alerted its portfolio firms about the potential risk in SVB and advised them to withdraw money from the bank.
SVB had noted that its clients had started moving more funds off balance sheet in the second half of 2022.
Info Edge founder Sanjeev Bikhchandani said a lot will depend on how quickly the US regulator steps in to allow depositors to access their funds, and to what extent. “This is a non-trivial problem for Indian startups, especially those that have flipped or chosen to domicile overseas. Many of them have banking ties with Silicon Valley banks and have funds there. There are deposits, which they will need to access in order to continue operating,” Bhikchandani said.
The sudden collapse of Silicon Valley Bank has sent shockwaves across Silicon Valley entrepreneurs. The Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank on Friday.
“It looks like there is more than what meets the eye – there is a reason all these people rushed to get their money out, and it can’t just be the letter to shareholders that the CEO wrote. It has to be more than ” That…,” said Pramod Bhasin, founder of Genpact.
Bhasin believes that it is unlikely to have an immediate impact except for select startups.
“… there are enough banks and enough liquidity in the world, that this will be more a local issue than an international issue,” he said.
Ganesh Natarajan, an industry expert and chairman of 5F World (a platform for digital startups, skilling and social ventures), observed that Indian startups do not have much risk exposure, and “need not to worry”.
“Even startups that have banked with SVB in the US will just have to wait a bit…most of them should get their money back,” Natarajan said.