The closure of Silicon Valley Bank (SVB), which mainly invested in start-ups across the world, has shaken the Indian start-up ecosystem. The closure of SVB is being touted as the biggest bank closure since the failure of Lehman Brothers, which led to the financial crisis in 2008. Friday’s development shocked the tech industry around the world, as tech unicorns and SaaS were SVB’s biggest customers . In total, Silicon Valley Bank had total assets of $209 billion and total deposits of approximately $175.4 billion as of December 2022.
According to Tracxn’s latest data, the US-based bank had exposure to 21 Indian start-ups, although the amount of the investment is not clearly mentioned.
One of its significant investments in India is unicorn Icertis, which has secured $150 million in funding consisting of a revolving credit facility and convertible financing from SVB, according to a report in Business Standard.
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Icertis, which provides contract management software to businesses using a software-as-a-service model, became a unicorn in 2021 and received investment from SVB in October 2022.
Other start-ups that have raised funding from SVB include Bluestone, Carewale, InMobi and Loyalty Rewardz. Among the VC players, Accel Partners has a tie-up with SVB. The SVB page stated that the founders of Accel India are choosing SVB to accelerate growth.
But Tracxn data also highlights the fact that SVB did not invest much after 2011.
Investments made by SVB in Indian companies
|Company||Funding ($ million)|
|Financial Inclusion Bharat||144|
But Indian founders and investors are now worried about asset transfer as a cap on withdrawals could be imposed, which could lead to multiple challenges. Startup founders are now weighing alternatives to transfer their capital raised overnight, even as SVB reassured clients not to worry.
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Pinterest and Coinbase board member Gokul Rajaram said founders in India don’t know who to turn to as an alternative to SVB. It is probably also true for founders in other countries.
SVB is deeply rooted in the US start-up scene and is the only publicly traded bank focused on Silicon Valley and technology start-ups. According to Fortune.com, the bank has made loans to 50% of all venture capital-backed companies in the US. Venture capital or private equity funds represent about 56% of the bank’s global banking portfolio in 2022. It has on its lists Pinterest Inc, Shopify Inc. and CrowdStrike Holdings Inc., which are some of the big names in the technology industry.
Trouble began at SVB after the bank said it had sold $21 billion in securities and was preparing to sell $1.75 billion in shares to shore up its finances.
Moody’s, which downgraded SVB’s rating, said rising US interest rates, increased macroeconomic uncertainty, venture capital investment activity and high cash consumption among SVB’s customers created difficult conditions for the firm.
The collapse in SVB’s stock has prompted many prominent venture capitalists, such as Peter Thiel’s Founders Fund, Coatue Management and Union Square Ventures, to instruct portfolio companies to limit exposure and pull cash from the bank, a report said on Friday Bloomberg.