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Decoding the potential impact of SVBS closure on Indian Startups
Concerns have been expressed about how the closure and takeover of Silicon Valley Bank (SVB) by US regulators may affect India's startup sector. In this article, we will try to decode the same.
After selling $21 billion in securities, SVB shocked investors on March 8 by announcing it would raise $2.5 billion through a share offering. The bank was shut down by the California Department of Financial Protection and Innovation.
Although the bank's collapse technically began last week, it is related to the global financial crisis that is currently afflicting the entire world. Many startups were forced to withdraw funds parked at the bank after funding dried up.
SVB served as a platform for venture loans and the deposit of startup capital, particularly for those raising money from US investors. Investors and analysts warned that for businesses that deposited money, the decline could cause cash flow issues, which could make it difficult to pay employees' wages and other regular obligations. The bigger worry is that several VCs placed millions in SVB, which would cause them to further delay funding transactions and postpone term sheets.
While no specific figure could be established, multiple industry insiders estimated that at least 1,000 Indian start-ups have some exposure to SVB. Listed entity Nazara Technologies stated that two of its step-down subsidiaries Kiddopia and Mediawrkz, have $7.75 million in cash on hand at SVB. SVB served as the default bank for Indian software-as-a-service start-ups and those funded by Y Combinator who established their American businesses and secured seed funding. All Indian start-ups that have received Y Combinator funding receive investment in SVB could lead to one possible impact of the decrease in the availability of funding for Indian startups.
A reduction in investors' faith in the startup environment is another possible effect. If a well-known bank failed, it may cause investors to lose faith in the soundness of the financial system more generally, which might deter them from funding startups. In turn, this might make it harder for Indian entrepreneurs to raise money, especially in the beginning.
It's important to note, though, that the Indian startup environment is robust and diversified Indian businesses would probably find new sources of capital and ways to adapt to any changes in the financial climate, even though the failure of a Silicon Valley bank may undoubtedly have some severe effects.
Trade list OF The day(14 March)
Banknifty Trades:-
Entry - 290
Exit - 273 ( Stoploss) 🛑
Entry - 247
Exit - 269 ( Target got hit ) ✅
Entry - 253
Average - 238
Exited - 262 ( Exited Before target but in profit ) ✅
Entry - 253
Average - 235
Exited - 282 ( Target got hit ) ✅
