News Karnataka
Tuesday, February 20 2024

Failure of Silicon Valley Bank to impact Indian startup ecosystem

Silicon Valley Bank shares plummet as investors flee
Photo Credit : IANS

The failure of Silicon Valley Bank (SVB), the largest vendor in the startup ecosystem, is likely to have a negative impact on the Indian startup scene, as it has created a great deal of uncertainty in the sector overnight.

According to the FDIC, as of December 31, 2022, SVB had approximately $209 billion in total assets and approximately $175.4 billion in total deposits. The number of deposits over the insurance limits was unknown at the time of closing.

The FDIC will determine the number of uninsured deposits after gathering additional information from the bank and customers. In reality, SVB has been a strong supporter of the Indian startup community and has provided banking services. This bank is used by the majority of Indian startups doing business in the United States because it is one of the few institutions willing to work with Indian banks.

Many banks are unwilling to work with customers from other countries. As a result, SVB has been able to collaborate with Indian companies that do not have US employees. So, if they leave, it will be extremely difficult for the Indian (companies).

Given that nearly every third startup in Silicon Valley is founded by an Indian-American, experts believe that a significant number of these founders will be impacted as early as next week in terms of making basic payments and paying their employees.

The failure of SVB is likely to have repercussions for Indian startups, many of which have large sums of money deposited with the bank. It will also have an impact on the ability of Indian startups to raise funds, as the US-based bank was a major source of funding for tech startups.

The closure has sent shockwaves through the Indian startup sector, which was already struggling with funding. Several Indian startups, including Bluestone, PayTM, and One97 Communications, that have been exposed to SVB’s investments may now be concerned that their raised funds will be stranded. Many businesses may be forced to cut costs, postpone projects, or lay off employees as a result of this.

SVB has played an important role in the Indian startup ecosystem, providing banking services and funding to many of the country’s most successful startups, including Flipkart, Ola and Zomato. SVB has also been instrumental in assisting Indian startups in expanding into the US market by providing them with the infrastructure and support required to establish operations in Silicon Valley.

Indian startups with funds in SVB should consider diversifying their banking relationships to reduce their reliance on a single bank. This could include opening accounts with several banks or investigating alternative banking services such as digital banks or fintech startups.

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Samson Clanet Miranda

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