Indian founders react to Silicon Valley Bank crash: 'One of my first investors'

The Silicon Valley Bank in Santa Clara, California.

The implosion of Silicon Valley Bank (SVB), a major US-based lender, has caused concern about a possible financial contagion around the world. Regulators seized the bank's assets after a run on deposits, marking the largest American banking failure since 2008.

California-based SVB was an important lender to American startups and also helped certain Indian ventures.

Here is a look at how Indian founders reacted to its meltdown:

Paytm's founder Vijay Shekhar Sharma recalled how SVB was one of his first investors. He was responding to a media report on how Indian startups could be hit by the crisis.

"Long back, by selling to other private investors, SVB exited fully with handsome returns on their total investment of only $1.7 million. "They neither are a current shareholder (in Paytm) nor invested the amount given here."

Silicon Valley Bank meltdown eerily reminiscent of Bear Stearns' 2008 implosion

Silicon Valley Bank was one of my first investor when @AshLilani supported us in first around of investments at One97.
Thanks to him, we grew from a telco VAS company to what we are today.
Long back, by selling to other private investors, #SVB exited fully with handsome… https://t.co/l7x9ElnrbG pic.twitter.com/t1ttYPOEXl

— Vijay Shekhar Sharma (@vijayshekhar) March 11, 2023

"> 60% of YC (Y Combinator)-backed companies have > $250K in SVB bank accounts," he tweeted. "FDIC (Federal Deposit Insurance Corporation) limit is $250K. Some startups could be at risk of losing big money."

Yesterday, Silicon Valley Bank (SVB) was taken over by the FDIC & we're one of the affected customers...

> 60% of YC backed co's have > $250K in SVB bank accounts (source: YC WhatsApp group). FDIC insurance limit is $250K - some startups could be at risk of losing big money:

— Rahul Mathur (@Rahul_J_Mathur) March 11, 2023

Snapdeal's Kunal Bahl said SVB lent them money in 2012, when the business was grappling with a cash crunch.

Startups are worried about paying employees after SVB collapse

"Investors weren't convinced we could pull it off," he tweeted. "Silicon Valley Bank extended a small debt line to us that kept us going. Hope they get past this phase."

In 2012, in the midst of pivoting our business model from online coupons to e-commerce, we found ourselves in a cash crunch as investors weren't convinced we could pull it off.#SiliconValleyBank extended a small debt line to us that kept us going. Hope they get past this phase.

— Kunal Bahl (@1kunalbahl) March 10, 2023

Sridhar Vembu of Zoho predicted "tough times ahead".

"Silicon Valley Bank's sudden collapse reminds us of the fragile foundation of bubble-fueled prosperity the world saw when valuations and net worth appeared to reach insane heights overnight," he wrote. "They can disappear overnight too."

What happened at SVB?

SVB focused on the tech sector and was vulnerable to the industry's troubles. It faced a surge in client withdrawals and had been trying to raise funds to tackle it.

Its stock collapsed 60 percent as it tried to close the $1.8 billion-loss from a  bond portfolio's sale.

Markets became jittery, fearing widespread chaos. But analysts assured the risks were limited..

"We do not believe there is a liquidity crunch facing the banking industry, and most banks in our coverage have ample access to liquidity," Morgan Stanley said.