The collapse of Silicon Valley Bank has affected many startups in India as well, affecting their daily cash needs and other running expenses.
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Startups: The collapse of Silicon Valley Bank, a major lender to US startups since the 1980s, has affected many startups in India as well, affecting their daily cash needs and other running expenses. US authorities seized the bank’s properties on Friday. Due to which it was not possible for the bank to survive on its own. Ruchit G Garg, chief executive of Harvesting Farmer Network, was one of the startup owners in India whose business felt the impact of the collapse of Silicon Valley Bank (SVB), the biggest blow since 2008.
Garg says that he has been doing banking work with SVB for more than 10 years. They have deposits which are still stuck with them. Thankfully for us the situation is a bit better as most of our operations are in India. He said that we already have a lot of money in the form of FDI (Foreign Direct Investment) in Indian entities just by planning and luck, but still a huge chunk of our money is lying in SVBs.
Money of many startups stuck in SVB
Explain that many other startups may be in a very bad shape in such a situation, Garg said, citing young companies that have their large-scale operations abroad, especially in the US. Many startups have their money locked up in SVB, the most serious ones being those operating in the US. If they are operating mostly in India, they will have funds in Indian banks as well. The problem is compounded for startups that have SVB as their only main banking partner. Whose startup provides a mobile marketplace for over 120 million farmers in India.
Indian startups also invested
At least 50 percent of US venture-backed technology and life science firms had banking relationships with SVB, according to the bank’s website. Many Indian startups have also deposited in SVB and invested in the bank. To explain the impact of the collapse on Indian firms, Garg distinguishes between debt- and equity-based investments. He said that companies that have got equity-based investment will have already received the investment amount, so there will be no risk, but for firms with debt-based investment from SVB, the risk is significant.
