How Indian tech cos banded together to help each other during SVB crisis

The SVB collapse has alerted hundreds of Indian investment and tech companies. They came together to help each other and share knowledge to deal with the impact

This month technologist and venture capitalist Sanjay Swamy took a few days off to attend a colleague’s wedding. But at 4.30 Am on Friday, March 10, he woke up to the news about the collapse of the Silicon Valley Bank (SVB) which is now known as the ‘Lehman moment’ for the technology industry. 

“We alerted everybody in our portfolio companies. But it was too late, the money was already locked up,” said Swamy, Managing Partner at Prime Venture Partners. “Our advice to them was no need to panic,  the money is safe.”

Indian tech firms and startups breathed a sigh of relief when Federal Deposit Insurance Corporation (FIDC), a US regulatory authority, recently announced that it will pay depositors an advance dividend within the next week, with additional payments to follow as asset sales take place. The FDIC insisted that it has moved all deposits from the SVB, which focuses on startups, to a newly established bridge bank and that all depositors will have access to their money as a result.

“All our companies banking with Silicon Valley Bank have been able to move 100 per cent of their money out of SVB to other US-based banks,” said Swamy on Twitter on March 14.
 

Founded in 1983, California-based SVB was a key source of funding for small tech firms and venture capital companies including numerous Indian companies. However, the recent developments alerted hundreds of Indian investment and tech companies. They came together to help each other and share knowledge to deal with such a situation. SVB's top clients also included many Indian software-as-a-service (SaaS) and IT unicorns. 

“As soon as it (SVB crisis) happened, the community rallied ranging from startups, investors and even the Indian consulate general,” said Vinod Muthukrishnan, chief customer officer at conversational artificial intelligence firm Uniphore and Chair for SaaSBOOMi (US), a community of SaaS founders and builders in India. “The community came together sharing tips, advice and what to do in such a situation.”

SVB collapse has also raised questions over the potential consequences for other banks. It was also one of the discussion topics at the recent annual conference held by SAASBooMi in India. The event witnessed the participation of over 950 SaaS leaders. Many companies are now in the process of implementing a strategy of having more than one bank account.

 “The SVB (crisis) has taught everyone that nothing can be taken for granted which means people will start hedging their bets a whole lot more,” said Muthukrishnan. “Everyone is looking at a (strategy) of not parking the capital at only one place.”

Vijay Rayapati, CEO and co-founder at Atomic Works, an analytical software company, has also been actively helping companies to deal with the impact of the SVB collapse. 

“Signup for Brex, Mercury or one of the Neobanks who can provide a credit card for small expenses and move all your SaaS/recurring payments to it,” said Rayapati in a tweet, while reaching out to the SaaS founders. “Get an account with one of the top banks, unfortunately, some of them need your physical presence. Use your connections and investors for high-level reference and push for a digital approach,” said Rayapati on Twitter.

SVB was the 16th-biggest bank in the U.S. and the largest in Silicon Valley by deposits. As of December 2022, it had approximately $175.4 billion in total deposits and $209 billion in total assets. As per the recent data furnished by Tracxn, SVB had made investments in approximately 21 startup companies in India.

“SVB was the default bank for Silicon Valley with strong linkages with the ecosystem for 40 years and many specific products catered to the startup and VC space,” said Anand Prasanna, Managing Partner, Iron Pillar, the tech-focused venture capital firm. “They were the specialists. Hence almost 50 per cent of tech companies in the valley used to bank with them.” 

Back at home,  Indian start-ups recently got together and raised issues, such as blockages in international wire transfers, disruptions due to threshold limits on withdrawals, lack of communication from US agencies, and the need for preferential access to credit, in a meeting on with the government over the fallout of SVB’s collapse.

Rajeev Chandrasekhar, minister of state for electronics and information technology, held a virtual meeting with over 450 members from start-ups, venture capitalists, and investors who have been directly affected by the closure of SVB. He assured them that the IT ministry would put together a list of suggestions and give it to the finance minister on behalf of start-ups.