Silicon Valley Bank collapse: impact on Indian startups

The collapse of Silicon Valley Bank (SVB) has sent shockwaves across the globe. One of the biggest bank failures since the 2008 global financial crisis, the collapse of SVB has far-reaching ramifications. This includes a significant impact on the Indian startup ecosystem.

SVB has been one of the preferred bank of startups and venture capitalists globally. Several Indian startups have exposure to the bank. In fact a large number of Indian startups, especially in the SaaS sector that services U.S clients, have accounts and deposits at the bank. Reports say that Indian startups have over $250,000 parked at SVB, this is more than what is insured by the Federal Deposit Insurance Corporation (FDIC).

"All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023", said FDIC in a statement that also asked customers with accounts that had over $250,000 to contact a toll-free number.

The other fallout of the SVB bank collapse will also impact the fundraising ability of Indian startups as the bank was a key source of funding for tech startups. As per reports, SVB has invested in several Indian firms including InMobi, Carewale, and Bluestone among others. For these companies, their raised funds could get stuck and lead to a cash crunch.

Also watch: Silicon Valley Bank collapse: a look at biggest banking failures since 2008

A combination of all these factors will further exacerbate the rough weather and a funding crunch that Indian startups were already facing. In fact, in the last few months, Indian startups have already been cutting costs and announcing layoffs, a situation that may only worsen going forward.

As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.