SVB collapse: Asian start-ups largely unscathed but US Fed’s rate hikes raise spectre of wider crisis

Asian start-ups did not have much exposure to the Silicon Valley Bank, but the crisis could now prompt them to review who their portfolio companies bank with

Continued Fed hikes could make conditions tougher for start-ups to raise capital, affect global economic recovery, observers note

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The Silicon Valley Bank was closed by US regulators last week. Photo: Reuters

Published: 8:30am, 14 Mar 2023Updated: 8:49am, 14 Mar 2023

The impact of the Silicon Valley Bank (SVB) collapse on Asia’s start-ups is likely to be limited but the relentless interest rate increases by the US Federal Reserve to beat back inflation have raised concerns of a broader financial crisis, analysts have said.

SVB collapsed over the weekend after investors flocked to withdraw their deposits as high interest rates eroded the value of the firm’s long-term bonds.

In moves to protect deposits and alleviate concerns, US regulators have set up a new facility to allow SVB customers access to their funds, while the British government and Bank of England facilitated a private sale of SVB’s UK subsidiary to HSBC.

“Asian start-ups did not have much exposure to SVB, and tend to be funded more by the local VC (venture capital) ecosystem, as well as local banks,” said Jamus Lim, associate professor of economics at ESSEC Business School Asia-Pacific.

“Some businesses will be reviewing who their portfolio companies bank with, and there may be, at the margin, a shifting of assets from smaller to larger, more established banks,” he added.

What could prove tricky for Asian start-ups, such as those in India, is if the Federal Reserve maintains its pace of rate increases and the easy access to cheap overseas funds dries up.

Ajay Jain, co-founder and managing partner at Silverneedle Ventures, said Indian start-ups that banked with SVB could see “short-term impact, but overall, there should be no major hiccup”. Some banks, however, had seen higher withdrawals in the past couple of days, he added.