Will SVB collapse impact the Indian talent market?

Active talent demand from tech startups had dropped to one-third of its typical volume during the second half of 2022, data by specialist staffing company Xpheno showed.

The collapse of Silicon Valley Bank (SVB) has created uncertainties in the talent market for Indian startups, which are estimated to have had deposits worth about $1 billion with the lander.

Regulators shut down SVB, which had $209 billion in assets at the end of 2022, on March 10 after a run on the lender.

However, HR and staffing firms said they are confident in the Indian economy and predict the SVB crisis will have minimal to no impact on the talent market. Though factors such as a slowdown may cause an imbalance in the Indian talent market, experts said the SVB collapse alone will not affect it.

Active talent demand from tech startups had dropped to one-third of its typical volume during the second half of 2022, data by specialist staffing company Xpheno showed. It has since remained in the less than 20,000 range and slowed down the velocity of hiring.

“The after-effect or an immediate impact of the SVB collapse is hence not showing up as a blip on the talent radar,” Kamal Karanth, cofounder of Xpheno, told Moneycontrol.

Nevertheless, he said the specific impact of the SVB collapse on layoffs and attrition will vary across the three major types of associations that startups have had with SVB.

Lower liquidity

The first and potentially least hit would be startups that built their reserves and deposits at SVB and there are interventions underway to secure, recover and repatriate these reserves.

“For these startups, it's largely an inconvenience of lowered liquidity and speed to funds. This group has a way out of the situation and will not necessarily go through the strain of layoffs. Short-term austerity would be a word for them,” Karanth said.

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The second group of ventures is those with credit lines and debt deals from and through SVB.

“Over and above the pressure to service the debt, they would be under further stress on the talent costs front,” Karanth said. “The alternative route to securing new credit lines and debt could be a complicated and time-consuming one.”

The third set of ventures with investments from and through SVB would be akin to the second group. Both these sets of startups are expected to be under pressure to control and cut costs.

“Layoffs are the quickest and most popular act that startups resort to during such adversity. Unless supported and scaffolded quickly through interventions, these ventures will soon get on the pathway of austerity with layoffs,” Karanth emphasised.

On March 18, SVB’s parent company filed for bankruptcy after worry spread among its long-established customer base of tech startups, prompting regulators to seize the firm’s banking unit.

The Federal Deposit Insurance Corporation transferred all deposits—both insured and uninsured—and substantially all assets of the former Silicon Valley Bank to a newly created ‘bridge bank’ and said depositors would have full access to their money starting March 13.

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Temporary hiccup

The performance of particular banks and financial institutions may have some bearing on technology and startup sectors, but it is unlikely that this will be the main factor influencing demand for talent, said AR Ramesh, director of managed services & professional staffing at Adecco India.

“This will only be a temporary hiccup because Indian businesses, particularly startups, continue to play a significant role in the global technology landscape and there is a high demand for talent in these fields,” he added.

However, the possibility of collateral damage can’t be denied.

“There are bound to be some hiccups here in India with all those startups involved with SVB in some way or the other,” said Pratik Vaidya, MD of HR and staffing firm Karma Global, adding that there will be an effect on the dynamics of these startups.

CIEL HR Services anticipates the choppiness to continue for at least one more quarter and predicts growth in hiring and positive hiring sentiment will return after that. Besides, the collateral damage of the SVB collapse is also predicted to be near zero.

“It's worth noting that the number of startups affected is relatively small, representing only 0.2 percent of total startups in India. Therefore, the impact on layoffs within the startup ecosystem is not expected to be significant,” said Aditya Narayan Mishra, MD of CIEL HR Services.

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The minimum impact, which staff firms predict, is likely to be more concentrated in the financial sector and companies that have a direct relationship with SVB, said Sarbojit Mallick, cofounder of job portal Instahyre.

“[Here], we are looking at another round of layoffs in the next few months if the situation doesn't improve,” he said.