DailyPost 2361
SILICON VALLEY BANK COLLAPSE – STARTUPs IMPACTED!
Silicon Valley Bank, SVB, collapse is the biggest that has happened since the tragic end Lehman Brothers Inc. The fall of a bank has repercussions far and wide and at times way beyond the financial sector. The nature of the clientele of the bank and services it offers to a specialized clientele, can be impacted in a way financial pundits will not be able to fathom out. Whether this fall would lead contagion or not is a different story, what is of utmost importance is what this collapse means the StartUp world, how does it get impacted and what it means for an ecosystem getting broadly tied to one bank.
It is said that a large chunk of the Silicon Valley tech businesses bank with the SVB, may be as much as 44%. What we call the startups have a special fancy for it and lots of them who have crossed the startup tag long time back continue to the its loyal customers. SVB has been serving the tech innovation world in a manner no other bank has. Both had a symbiotic relationship for the last for decades. A bank with this vintage and assets of over $211 billion dollars to vanish into the blue is what financial crisis legends are made of. That they did not know managing a bank or lack of vision does not hold ground.
The bank held on to all financial dealings of the startup companies, the rules were accordingly made, so that it became one stop for all their banking needs. They could not bank with any other bank. It was like putting all the eggs in the same basket and it went on fine for many decades. What was a boon in a normal situation has turned out to be the biggest crisis point. It became the weakest link in businesses life chain. This is what was emanating out of the SVB collapse. The startups movement would go back by a decade, conversely, they would take one more decade to reach position of today, is what is feared. It was putting the whole startup world in reverse gear and not limited to US.
Lack of cash flow could put businesses out of gear and more so the new fledgling ones. Lots of things in the tech world happens only through these companies, they stitch the tech world together too. Just think of few APIs getting broken and how would it impact the financial sector, and other sectors as well. It would be very difficult to visualize and manage the tech contagion. It can just spiral. Over 100 Indian startups have direct exposure to SVB, there is fear it might spread to other banking institutions. They are looking into options to move US deposits. With desperate efforts by the governments some formula is being worked out. As of now access has already been provided to the deposits. May be govt is able to bail out. But what about the future? Can businesses live in perpetual scare?
CAN WE BANK ON THE BANKS IS A TRILLION DOLLAR QUESTION?
Sanjay Sahay