Apex IT industry body Nasscom on Monday said the US administration’s stance on protecting depositors of Silicon Valley Bank that collapsed, is “reassuring” for Indian startups who have funds in that bank.
Biden administration’s announcement that depositors of failed Silicon Valley Bank (SVB) will have access to their money, has given hope and will address the immediate financial issues that these startups were grappling with, Nasscom’s Senior Vice President and chief strategy officer Sangeeta Gupta told PTI.
California-based SVB, the 16th largest bank in the United States, was closed on Friday by the California Department of Financial Protection and Innovation which later appointed the US Federal Deposit Insurance Corporation (FDIC) as its receiver.
SVB was deeply entrenched in the tech startup ecosystem and the default bank for many high-flying startups; its abrupt fall marked one of the largest bank failures since the 2008 global financial crisis.
The bank failed after clients — many of the venture capital firms and VC-backed companies that the bank had cultivated overtime — began pulling out their deposits, creating a run on the bank.
“The statement (issued by the Department of the Treasury, Federal Reserve, and FDIC) is reassuring for Indian startups who had funds invested in SVB, and will address immediate financial issue they were grappling with,” Nasscom’s Gupta said.
An industry watcher said the last few days had been “stressful” for startups and companies who had exposure to SVB, and the US government’s statement has signalled relief for those who were left in a lurch after desperate last-minute attempts to withdraw deposits were unsuccessful last week.
Of course, there will be a wait-and-watch on how long the entire process will take. That said, the ‘energy levels’ among such startups is certainly different since the US administration’s assurances came in, sources said.
According to experts, companies will be much more vigilant and careful about how they park funds from here on, and may choose to distribute their deposits across multiple accounts and banks, to safeguard their money and mitigate risks.
Meanwhile, Gaurav VK Singhvi, Co-Founder at We Founder Circle, noted that over the years, SVB has been a reliable and go-to bank for many Indian SaaS (Software as a Service) and Y Combinator-backed startups owing to its versatility, adaptability and convenience of fundraising activities.
“… the news of its sudden collapse came as a surprise to many, forcing many startups to transfer their accounts to different banks, however, the jitters of its downfall will have a limited impact on Indian startups both directly and indirectly,” Singhvi said.
“Wwe must also recognise that SVB’s clients have been struggling for cash over the past year and with the restricted runway, the consequences could be hugely damaging if they do not withdraw their cash on time for payroll and other operational purposes”, Singhvi added.
Established in 2020 in Mumbai, We Founder Circle (WFC) is a global community of founders and strategic angels that have come together to push the startup industry and steer it towards robust growth path.
WFC provides seed funding, business development, and global networking opportunities to startups as it believes early-stage ventures need a lot beyond just financial support to become scalable and stable. It has already enabled USD 20 million worth of investments across 100-plus startup deals since incorporation.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)