‘There will be short-term chaos due to Silicon Valley Bank collapse but…’: Indian VCs and startups optimistic of turnaround soon
The events that have unraveled in the past 48 hours have shocked the start-up ecosystem. But the Indian start-up community believes less exposure to SVB will not cause any life-threatening situation.
- Mar 11, 2023,
- Updated Mar 11, 2023 6:09 PM IST
Events in the US pertaining to the Silicon Valley Bank (SVB) that have unraveled in the last 48 hours have rocked the start-up ecosystem worldwide However, Indian start-up community sees a turnaround in the mid-term horizon. SVB was shut down by US regulators last night after the US regulators took control of SVB’s customer deposits. These developments are being compared to the financial crisis of 2008 sparked by Lehman's bankruptcy.
“Only 8-10 per cent of the Indian start-ups have exposure to SVB,” Neeraj Tyagi, Founder and Partner at We Founder Circle told Business Today.
However, it may lead to layoffs and pause some of the funding deals which were in the pipeline. “The problem is that there was a lot of money parked with them and now they don’t have enough to redeem. The perceived risk of your money getting stuck is what is creating so much panic.”
Sanjay Swamy, Managing Partner at Prime Venture Partners, believes that the situation is going to get “resolved quickly.” “While the startup ecosystem is in shock, most of the Indian companies are relatively isolated because their money is split across countries, and often just in secure money market funds,” he told BT.
Abhay Singhal, Co-founder of Indian start-up inMobi said that it will not be surprising if Morgan Stanley or JP Morgan acquires SVB by Monday. Singhal also echoed Tyagi’s point and said, “This (the SVB crisis) will not have any impact in the mid to long term. There is enough liquidity in the market to not fund the start-up ecosystem.” He echoes Tyagi’s sentiments and said that the chaos in the short term is going to come because deals will be paused.
SVB has been able to carve a niche for itself in the last 40 years since it has been functioning. VCs whom BT spoke to said that SVB never functioned like a bank. Unlike legacy banks, it was always run with an aim to meet the requirements of the start-ups. It partnered with VCs, start-ups, and other stakeholders of the ecosystem and became extremely popular. This is why VCs and start-ups placed their trust in SVB and deposited their funds.
In India, SVB has invested in SaaS companies such as Netradyne and Icertis. It was also one of the first investors in Indian matrimonial website Shaadi.com.
Like how every adversity can become an opportunity to learn and grow, even the SVB crisis has brought some learnings for the ecosystem.. Sasha Mirchandani, Managing Director and Founder of Kae Capital, believes this situation shows that the start-ups’ risk mitigation needs to be stronger. “It forces all of us to rethink. No start-up should’ve all eggs in one bracket,” he told BT
He said that luckily they don’t have any companies with large exposure to SVB. “Those that have some degree of exposure are again well capitalized, so it’s not going to be life-threatening for any of our portfolio companies,” he concluded.
Also Read: ‘Silicon Valley Bank is the SBI for startups,' say Indian founders as they brace for uncertainty
Events in the US pertaining to the Silicon Valley Bank (SVB) that have unraveled in the last 48 hours have rocked the start-up ecosystem worldwide However, Indian start-up community sees a turnaround in the mid-term horizon. SVB was shut down by US regulators last night after the US regulators took control of SVB’s customer deposits. These developments are being compared to the financial crisis of 2008 sparked by Lehman's bankruptcy.
“Only 8-10 per cent of the Indian start-ups have exposure to SVB,” Neeraj Tyagi, Founder and Partner at We Founder Circle told Business Today.
However, it may lead to layoffs and pause some of the funding deals which were in the pipeline. “The problem is that there was a lot of money parked with them and now they don’t have enough to redeem. The perceived risk of your money getting stuck is what is creating so much panic.”
Sanjay Swamy, Managing Partner at Prime Venture Partners, believes that the situation is going to get “resolved quickly.” “While the startup ecosystem is in shock, most of the Indian companies are relatively isolated because their money is split across countries, and often just in secure money market funds,” he told BT.
Abhay Singhal, Co-founder of Indian start-up inMobi said that it will not be surprising if Morgan Stanley or JP Morgan acquires SVB by Monday. Singhal also echoed Tyagi’s point and said, “This (the SVB crisis) will not have any impact in the mid to long term. There is enough liquidity in the market to not fund the start-up ecosystem.” He echoes Tyagi’s sentiments and said that the chaos in the short term is going to come because deals will be paused.
SVB has been able to carve a niche for itself in the last 40 years since it has been functioning. VCs whom BT spoke to said that SVB never functioned like a bank. Unlike legacy banks, it was always run with an aim to meet the requirements of the start-ups. It partnered with VCs, start-ups, and other stakeholders of the ecosystem and became extremely popular. This is why VCs and start-ups placed their trust in SVB and deposited their funds.
In India, SVB has invested in SaaS companies such as Netradyne and Icertis. It was also one of the first investors in Indian matrimonial website Shaadi.com.
Like how every adversity can become an opportunity to learn and grow, even the SVB crisis has brought some learnings for the ecosystem.. Sasha Mirchandani, Managing Director and Founder of Kae Capital, believes this situation shows that the start-ups’ risk mitigation needs to be stronger. “It forces all of us to rethink. No start-up should’ve all eggs in one bracket,” he told BT
He said that luckily they don’t have any companies with large exposure to SVB. “Those that have some degree of exposure are again well capitalized, so it’s not going to be life-threatening for any of our portfolio companies,” he concluded.
Also Read: ‘Silicon Valley Bank is the SBI for startups,' say Indian founders as they brace for uncertainty