Union Minister Rajeev Chandrasekhar is scheduled to meet with Indian startups this week to understand the impact of the abrupt closure of the troubled Silicon Valley Bank (SVB) and offer government assistance in overcoming the crisis. According to recent data from market intelligence platform Tracxn, SVB had exposure to at least 21 startups in India, although the amount invested in these startups is unknown. The collapse of the US-based SVB, the largest lender to some of the world’s largest tech companies, has triggered fear in the Indian startup ecosystem.
Background on SVB collapse and its impact on startups
The failure is being described as the largest financial institution failure since the 2008 Washington Mutual collapse at the height of the financial crisis. The financial world was shaken when California regulators took the decision to shut down Silicon Valley Bank (SVB) and place it in receivership. The move was prompted by the bank’s unsuccessful attempt to sell shares, which led to many startups being urged by their venture capital firms to withdraw their funds. The impact of this decision was felt across the globe, as the collapse of such a major bank caused concern and uncertainty in the financial market.
According to a report, Silicon Valley Bank (SVB) had more than 2,500 venture capital firms, including Lightspeed, Bain Capital, and Insight Partners, as its clients. The collapse of SVB has raised concerns among Y Combinator-backed Indian startups, and the situation is still uncertain as the startups are waiting for the US Federal Reserve to take action. Indian startups that had deposited their funds in SVB could also face the impact of the bank’s collapse. However, on Sunday night, regulators confirmed that all the deposits would be returned, providing some relief to the affected parties.
Y Combinator, the US-based technology startup accelerator that has invested in thousands of startups, including 200 from India, and have some level of exposure to troubled bank Silicon Valley Bank (SVB), has written to the US Treasury Secretary Janet Yellen and others, stating that further shockwaves that could lead to financial crisis and layoffs of more than 1,00,000 workers and asked them to prevent it.
Garry Tan, who is the CEO and President of Y Combinator, has written a petition with the aim of saving startups and hundreds of thousands of jobs. The petition has been signed by more than 1,200 CEOs and founders, representing over 56,000 employees.
Among the startups that have received funding from SVB are Bluestone, Carwale, Paytm and Loyalty Rewardz. However, Tracxn data indicates that SVB has not made substantial investments in Indian startups since 2011.
Abhay Singhal, the co-founder of InMobi Group, has stated that the recent sale of securities at a mark-to-market price that resulted in a loss of $1.8 billion has created fear in the market and this will have a short term effect on the funding for startups.
The Indian government has taken several measures to encourage the growth of startups in the country, including the launch of the Startup India initiative. The initiative provides startups with various benefits, such as tax exemptions, access to funding, and simplifying regulatory processes. These efforts have helped to create a thriving startup ecosystem in India, making it the third-largest startup ecosystem in the world after the United States and China.