MUMBAI: Silicon Valley Bank (SVB) crisis has sent shock waves in the Indian start-ups' sector, which was already facing a funding problem. The fall of SVB will dent the fundraising ability of Indian startups as the US-based bank was a key source of funding for tech startups.
“Silicon Valley Bank is quite popular among US-focussed Indian startups and is among the most important capital provider to tech start-ups in India. Its failure will have serious implications on Indian start-ups,” a senior official of a Bengaluru-based startup told The New Indian Express.
Fearing that their funds may get frozen, start-up founders and investors are withdrawing funds from SVB and transferring them to other banks. When it comes to fundraising, SVB was a trusted name among Indian start-ups. Last year in September, artificial intelligence firm Netradyne which focuses on driver and fleet safety raised $65 million from Silicon Valley Bank. Later in October, Software-as-a-service (SaaS) start-up Icertis had raised $150 million through a revolving credit facility and convertible financing from the US-based bank.
The start-ups are now staring at a serious fund crunch. “Fall of SVB is not good news for the Indian startup ecosystem as it has significant exposure in Indian start-ups. SVB crisis will dent the fundraising ability of Indian start-ups. When it comes to funding, the US is the biggest source of funds for Indian start-ups. So any challenge there has a direct impact on Indian firms,” said Rachit Chawla, CEO of Finway- a financial services providing firm.
“Any liquidity tightening may force some startups to wind down their operations. The startups in India were already under pressure as we know that four out of five startups are anyway not generating profits,” added Chawla.