Wednesday, March 22, 2023

Indian startups heave a sigh of relief as drawal limit for SVBs removed – Usky News

New Delhi: US regulator’s move to calm markets by assuring beleaguered depositors of Silicon Valley banks access to their full money from Monday is expected to bring some respite to startups looking for ways to get their deposits back. scrambling for. California based lender.
Siddarth Pai, founding partner, 3one4 Capital, estimates the exposure of Indian startups to SVB to be in the range of $2.5-3 billion. “The move has definitely given some comfort to startups, but the big question is whether the founders will be able to transfer all their money from the bank in one go and whether the system will be able to support the withdrawal process. Kind is not strong,” he told TOI, adding that if no new management steps in, there could be huge exits.
“There is a crisis of confidence now. They need to get comfortable in the process. Till then there will be some uncertainty in the market,” Pai said.
At present, companies are feeling some relief. The founder of a local B2B startup backed by US technology startup accelerator Y Combinator said the announcement is friendly to startups and VCs. “Moreover, never has a depositor lost money in a bank run or failure. Even companies that were unprepared for such an event could survive after a brief period of disruption.” Anyway, a lot of companies are now providing lines of credit to startups,” said the founder.
In a tweet, Minister of State for Electronics and Technology Rajeev Chandrasekhar said the move by the US government has removed a looming risk for Indian startups. “The lesson for Indian startups from the crisis – rely more on the Indian banking system,” said Chandrasekhar.
The collapse of America’s 16th largest lender, often relied upon by new-age tech firms to service its banking processes, sent the startup community into a tizzy. The inability to access funds generally affected the working capital requirements of startups, disrupting daily operations.
Pai said at least 60 of India’s over 100 unicorns are headquartered outside India. Pai said, “Almost all SaaS startups are based overseas. Y Combinator supports around 250 Indian startups, of which 90-95% are based outside India.”
The key development that startups and the wider market will now track is the acquisition of SVB by a credible buyer. Experts say, “Unless it is acquired by a large bank, no business will go back to SVB.” Atit Danak, partner and head of CONXT practice at Zinov, said, How soon a new buyer comes along will be important.”
“Several Indian-origin startups backed by Y Combinator have deposits of more than $250,000 in SVB, the maximum protected by deposit insurance. This announcement (lifting the cap) will come as a welcome relief to these startups, which “The financial crisis is already looming large as venture capital dries up globally,” said Pranav Bhaskar, Partner, SKV Law Offices.


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