‘Stop sensationalizing’: Serial entrepreneur Ganesh Krishnan on SVB crisis affecting Indian startups

Ganesh Krishnan, a seasoned entrepreneur and founder of GrowthStory said that sensationalizing the Silicon Valley Bank crisis would only create confusion and spread misinformation among Indian startups.

He took an example of a news article which said that Indian startups will be adversely impacted by the SVB crisis. In a LinkedIn post, Krishnan wrote, “A recent article about the Silicon Valley Bank crisis and its supposed ripple effect on Indian startups is a classic case in point. The fact is, the startups mentioned in the article got money from SVB, not the other way around. SVB invested in them through the fund route, putting money into companies and getting shares in return. When these companies monetized or raised further rounds of funding, SVB sold its shares. End of story.”

Krishnan further said that there is no apt relevance of what's happening to Silicon Valley Bank in the US to these Indian startups. He suggested that a clear differentiation should be drawn to avoid spreading unnecessary panic.

However, Krishnan also acknowledged that Indian startups with operations in the US are definitely facing challenges due to the SVB crisis. Explaining that, he wrote, “SVB has long been a favourite bank for them, and many have bank accounts there. But with the insured amount limited to $250K, anything above that is now in peril. This poses an immediate challenge for startups trying to meet their next month's payroll, particularly those with bi-monthly payrolls. The big question now is when the balance money will become available and how many cents to the dollar it will be.”

Even if any of these Indian startups have SVB as a shareholder and still figure in the cap table, which is unlikely, it will have zero impact on them, he added.

“In short, it's time to stop sensationalizing and start getting the facts straight. We need to be clear about the issues and avoid spreading misinformation that can cause unnecessary panic,” Krishnan wrote on LinkedIn.

The California-based Silicon Valley Bank, which is one of the prominent lenders for tech companies, announced its public offering of a $1.75 billion share sale to shore up its balance sheet. It liquidated nearly all of the securities in its portfolio that were on the market.

In an investor prospectus, the company said it needed the fresh capital infusion to plug a $1.8-billion hole caused by the sale of a $21 billion loss-making bond portfolio consisting mostly of US Treasuries. This led to widespread panic among its clients and depositors and also triggered a massive selloff.

As panic grew among its investors and depositors, SVB was forced to shelve its fundraising plan.

Silicon Valley Bank (SVB) is one of the important lenders for early-stage businesses in the US. As per Fortune.com, the bank has been lending to 50 per cent of all venture-backed companies in the US. Venture or private equity funds make up approximately 56 per cent of the bank's global banking portfolio in 2022.

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