Nithin Kamath on Monday spoke up about the many things that can go wrong with a business and cited an example of Silicon Valley Bank (SVB) in the US which collapsed recently.
"It is ridiculous how many things can go wrong when running a business. Everything from rapid change to market sentiment to waking up one day and being unable to access money in the bank, like with SVB," the Zerodha co-founder and CEO tweeted.
He added that being pessimistic might be an underrated skill set for running a business. "Consider everything a risk and do everything you can to mitigate it. Every business will be exposed to a black swan event at some point; the idea is to survive those," Nithin Kamath said. "The lesson from SVB or Yes Bank in the Indian context is to have funds, especially working capital, distributed across a bunch of banks."
Read more: 'Human decency': Zerodha CTO reveals secret behind employee retention
SVB was a key lender to US startups since the 1980s. Last Friday, US authorities swooped in and seized its assets after a run on deposits made it no longer tenable for the medium-sized bank to stay afloat on its own.
Little known to the general public, SVB specialised in financing start-ups and had become the 16th largest US bank by assets: at the end of 2022, it had $209 billion in assets and approximately $175.4 billion in deposits. Its demise represents not only the largest bank failure since Washington Mutual in 2008, but also the second-largest failure ever for a retail bank in the United States.
Read more: Indian start-ups to feel tremors of Silicon Valley Bank collapse
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