Will Asia’s start-ups feel the heat of Silicon Valley Bank collapse?

The failure of the US tech sector’s bank of choice has sparked contagion fears and sent a crisis of confidence rippling through the global economy

Interest rate uncertainty and credit crunch fears have put many Asian business owners on edge, adding to liquidity woes amid the end of easy money

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Silicon Valley Bank’s collapse has raised the spectre of financial contagion in the global economy and created uncertainty for tech start-ups. Photo: Reuters

Published: 1:00pm, 17 Mar 2023Updated: 3:01pm, 17 Mar 2023

As soon as he had an inkling that a crisis was brewing at the US-based Silicon Valley Bank (SVB), Indian businessman Ruchit G Garg tried to pull out the bulk of his deposits – but found he was unable to transfer the funds.

“I did not panic, and told my wife that there might be some concerns, but we don’t have to worry as we have a good business in India,” said Garg, founder and CEO of the Harvesting Farmer Network, an agriculture technology platform that helps smallholder farmers in India sell their crops.

US regulators have since closed the bank, took control of its deposits and sought to reassure account holders that their money is safe. Two days later, they also shut down the New-York based Signature Bank, which like SVB had a large percentage of uninsured deposits, to prevent a spreading crisis.

Signage outside a branch of Signature Bank branch in New York. Its collapse was the US’ third-largest bank failure. Silicon Valley Bank was the second-largest. Photo: Bloomberg

The closures have raised the spectre of financial contagion in the global economy and created uncertainty for tech start-ups, as SVB was such a substantial lender to the sector.

Garg’s ties with SVB began when he quit his job at Microsoft in 2011 to launch a start-up called 9Slides Inc out of a garage in the United States. He later moved back to India in 2019 to start the Harvesting Farmer Network, but maintained his SVB account.

Over the last three years, the company’s clientele has swollen to 3.7 million farmers and it has developed strong ties with local partners. “Things may be anxious for a few months, but it will all come back,” Garg said.

Financial turmoil

Most Asian start-ups are unlikely to be badly hurt by the current turmoil in US financial markets, analysts say, but it will affect their ability to access the cheap global capital that had helped them to expand in recent years.

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