SVB collapse: Indian startups should resist pressure from large investors to domicile outside, says Mohandas Pai

Former Infosys director and chairman of Aarin Capital T V Mohandas Pai said that startups that do almost all their business in India and have all their employees here should resist any pressure from large investors to domicile outside, as he cited key lessons to be drawn from the collapse of Silicon Valley Bank.

He advised founders of India-centric startups "to be careful" and "not get carried away" by investors who force companies they fund, to domicile in the US and open bank accounts there as well, according to a PTI report.

Terming Silicon Valley Bank as "a startup-friendly bank", Pai said that its collapse is a "blow" to the startup ecosystem.

"Just how big is the blow, is something that we have to watch from startup to startup, and founder to founder," Pai told PTI.

Stating that the exposure of the Indian startup ecosystem to Silicon Valley Bank is not too high, Pai said that startups whose businesses are centred around India and have very little to do with the US should operate as an India-headquartered company.

The sudden closure of Silicon Valley Bank that unfolded earlier this week has created shockwaves in the startup sector, which has been struggling with a sharp slowdown in venture funding.

As per Pai, the collapse of Silicon Valley Bank, a startup-friendly bank, is a blow to many, including young companies.

He also talked about the need for the Reserve Bank of India (RBI) to work more closely with the startup ecosystem to make it easier for Indian ventures to do global business.

The industry veteran mentioned that there is a great amount of pain for Indian startups to get money from overseas into India and send money from India, overseas.

He added that it is important to make things easy for Indian startups to operate here so they don't have to go overseas or open a bank account to do overseas transactions.

Regulations that are not startup-friendly and involve too much documentation should be changed, he stated.

Earlier today, Union Minister of State for Electronics and IT Rajeev Chandrasekhar said that he will meet the representatives from the country's startup community to assess the impact of SVB Financial Group's collapse.

"The SVB Financial closure is certainly disrupting startups across world. Startups are an important part of #NewIndia economy. I will meet with Indian Startups this week to understand impact on them n how @narendramodi govt can help during this crisis," he said in a tweet.

(With PTI inputs)

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