People look at signs posted outside of an entrance to Silicon Valley Bank in Santa Clara, California. (Photo | AP)
BENGALURU: The crisis at Silicon Valley Bank (SVB) is a wake-up call for many start-ups in India, especially Software-as-a-service (SaaS) start-ups that have a significant customer base in the US.
Experts say this collapse also teaches start-ups to diversify their funds instead of banking only with one bank.“The lesson from SVB or Yes Bank in the Indian context is to have funds, especially working capital, distributed across a bunch of banks,” said Zerodha co-founder Nithin Kamath.
Doordash’s Gokul Rajaram, a venture investor, also pointed out that India-based founders don’t know who to turn to as an alternate to SVB. At least 16 Indian start-ups have funding involved with SVB as per Tracxn data. This includes BlueStone, Drip Capital, Hitachi Payment Services, CarWale, Paytm and Naaptol, among others.
“SVB became the single weakest link and its collapse could have had far-reaching repercussions not just in tech capitals but on Main Street as well with many companies at real risk of not being able to make their payrolls. Some Indian companies had exposure to SVB as well. Especially those who have raised funds from US-based funds or who flipped to the US,” Karteek Pulapaka, Partner, Java Capital said.
It is said that depositors of the SVB will have access to their money from Monday. Pulapaka said that the bottom line is simple risk mitigation by distributing funds across 2-3 reputed banks. Aditya Narayan Mishra - MD and CEO of CIEL HR Services stressed on the importance of diversification for start-ups. “Putting all your eggs in one basket is never a good idea, and companies will need to be more careful going forward when depositing their funds,” he said.
While mobile gaming platform Nazara Technologies said that its step-down subsidiaries- Kiddopia Inc and Mediawrkz Inc- hold cash balances of approximately `64 crore at SVB, Freshworks in a statement said that the vast majority of its cash and marketable securities today are not held at SVB.
“We use SVB and several other banks for normal operations. Our exposure to the current SVB situation is minimal relative to our overall balance sheet. We are working with our customers and vendors who were using our SVB account to migrate to alternate bank accounts. We do not foresee any disruption to our employees or customers,” it added. Meanwhile, HSBC on Monday said that it will take over the UK arm of SVB.
