Silicon Valley Bank collapse gives Indian startups jitters

CHENNAI: The collapse of Silicon Valley Bank (SVB) may impact entrepreneurs and startups across the world as SVB has been the banker of choice for the global startup world, including Indian entrepreneurs.

It is common for desi startups to choose to be incorporated in the US to access capital from global VC firms, and the money raised is often deposited in SVB. "Almost 90% of India's SaaS (software-as-a-service) startups with a large customer base in the US, and also startups backed by Y Combinator (a renowned US startup accelerator), banked exclusively with SVB," a venture capital investor told TOI.

It is common for Indian startups to choose to be incorporated in the US to access capital from global VC firms, and the money raised is often deposited in SVB. This is more prevalent among SaaS firms, whose customers are typically in the North American market. SaaS firms sell software as a subscription online, and India has been particularly strong in the segment, since it requires negligible investment in the customer market.

For early stage startups among these, the SVB accounts typically hold the investments they raised. Their customer revenue is mostly deposited in Indian accounts for operations and salary expenses here. The larger and older SaaS companies, however, have diversified their holdings, banking with numerous large banks.

Even as the US regulator shut SVB down on Friday night, many startups with deposits in the bank anxiously tracked developments. The money in the Indian bank accounts are enough for only 2-3 months of payroll and operations. Many are hopeful of a resolution by then.

TOI spoke to five startups who were alerted by their global investors of the SVB crisis early on Friday, and while some of them managed to pull out their money, others are waiting anxiously for the US regulator to finalise plans.

Prabhu Ramachandran, co-founder & CEO of real estate SaaS startup Facilio, said they have "a major portion" of their funds with SVB. "We have money outside SVB to cover 4-5 months of our operations. This gives us more than sufficient time for the crisis to be resolved, and for us to access our funds at SVB," Ramachandran said. "The whole thing happened in a span of 24 hours," he added.

SaaS startup Rocketlane, which also had money in SVB, managed to pull out part of their money in time. "Losing access to your funds for payroll is the last thing we are prepared for as a startup. So it was a lot of chaos and confusion in trying to figure out the right thing to do," Srikrishnan Ganesan, co-founder, Rocketlane, said.

Gaming firm Nazara Technologies informed exchanges on Sunday that two of its subsidiaries - Kiddopia and Mediawrkz - together hold around $7.8 million (Rs 64 crore) in SVB.

Another tech startup that tried to transfer funds out of SVB on Friday found its wire transfer frozen. The founder told TOI that a majority of investments raised and revenue was in the SVB account.