SVB collapse: The collapse of US-based Silicon Valley Bank (SVB), the second-largest bank failure in US history, has sent shockwaves through financial and tech circles raising concerns about other casualties like Signature Bank. But in a bid to restore clients’ and market confidence, Silicon Valley Bank N.A.'s new CEO Tim Mayopoulos on Monday said that the lender is open to conducting business as usual. The bank is all set to conduct business as usual within the US and is expected to resume cross-border transactions in the coming days.
SVB, a key lender to startups across the US since the 1980s, was shut down on Friday and was taken over by the Federal Deposit Insurance Corporation (FDIC) after depositors started withdrawing money at an alarming rate as they feared the bank would soon become bankrupt.
FDIC created the new entity, Silicon Valley Bank N.A., and said that the existing and new deposits of the collapsed bank will be protected by the US financial regulator.
On Friday last week, the regulators took control of SVB –– after a huge run on deposits left the medium-sized bank unable to stay afloat on its own.
On Sunday, US authorities unveiled sweeping measures to rescue depositors' money at the failed SVB.
The bank's UK arm was acquired by HSBC Holdings Plc on Monday, the culmination of a frantic weekend where ministers and bankers explored various ways to avert the SVB unit’s collapse.
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SVB's collapse and startups
Startup-focused SVB was a popular entity in the start-up world. As per experts, the start-up sector is likely to face some difficulties at least for the next few weeks looking at the current scenario.
According to a petition filed by Y Combinator to the US government on Sunday, around 10,000 small businesses that had deposits in SVB will fail to make payroll in the next 30 days.
Around 100,000 jobs are expected to be impacted due to the collapse.
Another petition to the US Secretary of Treasury Janet Yellen stated that SVB has over 37,000 small businesses with more than $250,000 in deposits.
Indian startups’ exposure
Several VC firms and start-ups in India have come to the aid of start-ups. Nazara Technologies (Nazara), a mobile gaming company, said two of its subsidiaries together more than $7.75 million in balances at the failed bank. Nazara said its step-down subsidiaries — Kiddopia Inc. and Mediawrkz Inc. — hold cash balances worth $7.75 million in SVB. Kiddopia Inc. is a 100 per cent subsidiary of Paper Boat Apps, where Nazara owns 51.5 per cent stake. Similarly, Mediawrkz Inc. is a 100 per cent subsidiary of Datawrkz Business Solutions, where Nazara has 33 per cent.
Funding platform Recur Club said it was allocating $15 million to all Indian founders affected by the crisis. Payments major RazorpayX has created a dedicated desk to help start-ups move funds from their US banks to India.
The Centre has also swung into action. Rajeev Chandrasekhar, Minister of State for Electronics and IT, said that he will meet representatives of start-ups this week to assess the impact of their exposure to the bank.
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