The Silicon Valley Bank crisis has rocked the global business ecosystem. The US regulators shut down SVB on 10 March. SVB Financial Group filed for Chapter 11 bankruptcy protection on 17 March
Business Today spoke to a couple of ecosystem stakeholders to understand the impact of the crisis on the Indian start-up and IT ecosystem
Addressing a Twitter townhall, Minister of State for IT Minister Rajeev Chandrasekhar shared that over $1 billion worth of capital “attributable to Indian start-ups” was stuck in deposits at SVB when it went down
“And this is a conservative estimate. Several hundred start-ups were directly impacted and funds that invested in them were also impacted,” the minister said
Chandrasekhar also shared that over $250 million has been transferred from SVB to GIFT City banks in the last few days
Earlier this week, Chandrasekhar also held a consultation with 460+ Indian start-ups to understand and assess the full impact of the SVB crisis
“I’ve submitted a report on the consultations to the Finance Minister. We need to see how we can move Indian start-ups to the Indian banking system instead of relying on complex cross-border systems,” he explained
Start-ups apart, the collapse of SVB has added to the uncertainty faced by Indian IT companies, which were already facing headwinds due to the macroeconomic slowdown in the West
This collapse will slow down new builds, cause cost pressure, and further delay the onboarding of new employees in the IT sector, Vineet Nayar, former CEO of HCL Technologies told BT
Several ecosystem stakeholders are comparing it to the 2008 financial crisis. Similar trends were observed in the aftermath of these crises
In 2008, 43% of Western companies had to cut back their IT spending due to the global financial meltdown as per a report by Forrester. This sector will face challenges in the immediate future
However, despite the short-term difficulties, experts are bullish on the sector in the medium term. The pain for start-ups and IT is only for short-term and it will surpass, they believe