The move by the US regulator to calm markets by assuring troubled depositors of Silicon Valley Bank access to all their money beginning Monday is expected to provide some relief to startups, which have been scrambling to find ways to retrieve their deposits stuck with the California-based lender.
However, minister of state for Electronics and Technology Rajeev Chandrasekhar tweeted: “Learning for Indian startups from the crisis – trust Indian banking system more.”
The collapse of America’s 16th biggest lender, often relied upon by new age tech firms to service their banking processes, sent the startup community into a tizzy. Inability to access funds typically hit startups’ working capital requirements, disrupting daily operations.
Siddarth Pai, founding partner at 3one4 Capital, estimates Indian startups’ exposure to SVB to be in the range of $2.5-3 billion. He estimates at least 60 of India’s more than 100 unicorns are headquartered outside India.
“The assurance has definitely given some comfort to startups, but the bigger question is whether founders will be able to transfer all their money out of the bank at one go and if the system will be able to support the withdrawal process,” he stated, adding that large withdrawals may take place if no new management steps in.
“There’s a crisis of confidence now. They need to get comfort in the process. Until then, there will still be some uncertainty in the market,” Pai said.
For the time being, companies are feeling a little relieved. The founder of a local B2B startup backed by US technology startup accelerator Y Combinator said the announcement is favourable for startups and VCs. “Also, never has any depositor lost money in a bank run or failure. Even companies which had not prepared for such an eventuality would have survived after navigating a brief period of disruption. There are anyway lots of companies providing line of credit to startups now,” the founder said.
President Joe Biden on Monday told US residents the nation’s financial systems are sound, following the swift and stunning collapse of two banks that prompted fears of a broader upheaval.
