Startups ET spoke with said the panic over their deposits getting stuck has now settled. They are working with Indian as well as international banks to move the funds out of SVB, which until last week was one of the most-popular US banks with startups.
Also read | US government shuts Silicon Valley Bank; Indian SaaS firms mull options to transfer deposits
On Monday, some of them were already opening accounts at bank branches at the International Financial Services Centre in Gujarat’s Gift City. Banks in Gift City allow customers to open foreign currency accounts for international transactions.
RBL Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank and HSBC are working with them to open accounts in Gift City, startup founders and investors said.
They are also exploring transferring their deposits to neobanks like Brex in the US as well as traditional institutions such as JPMorganChase, HSBC and CitiGroup.
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“In the background of the SVB collapse, we saw an opportunity to help the startups that could have been impacted by it,” said Ganesh Sankaran, head of the wholesale banking coverage group at Axis Bank. “Many financial sponsors have connected us with their portfolio companies who would be keen to explore our Gift City proposition,” he said.
The lender is already in talks with startups in B2B ecommerce, large online car marketplace and food-tech who want to move funds to its Gift City branch, Sankaran said.
The aim is to provide immediate services to the affected startups to avoid a contagion from spreading, another lender said.
Big relief
Ayush Pateria, cofounder and chief executive of Bengaluru-based startup Snazzy, said the news of deposits being accessible came in as a great relief. “All the depositors will be 100% protected, and all the money will be made available starting Monday. Most startups are currently figuring out where they want to move this money to,” he told ET.
“There are multiple options — for people who have alternative accounts in the US will move money there, and they will prefer a bigger bank. Teams from HSBC and CitiGroup are actively reaching out to Indian startups to help them open bank accounts in the US,” he said. “It’s usually not easy to open accounts there because the process requires a social security number and a physical presence in the US, which is why startups used to bank with SVB because it was friendly in that way.”
Nazara Technologies — with two of its step-down subsidiaries having Rs 64 crore in SVB — is still in a wait and watch mode before it goes back to the markets with a formal announcement, CEO Nitish Mittersain said.
“Now we are feeling a bit more relaxed about that. As soon as we are able to, we will transfer the funds out. We will not be able to bring in the funds back to India for sure, because these are funds held by subsidiaries in the US,” Mittersain said.
One option is moving money to Gift City where people are opening dollar accounts to be able to conduct foreign transactions, said Pateria of Snazzy, a Y Combinator-backed firm. “For startups who are actively doing transactions with companies in the US, it makes more sense.”
Bank accounts can be opened faster in Gift City while it takes at least four-five days in the US, said a person directly dealing with the impacted companies, including Y Combinator firms. “Nobody wants to wait any longer now that deposits will be available for transfers. They would move to Gift accounts and then later move to other US banks,” this person added.
Zero-interest loans
Another founder of a startup backed by Y Combinator told ET that while there was an urgency among companies to move their funds out, some were approached by venture capitalist firms, offering zero-interest loans to meet their immediate working capital requirements. “In finance, there are never any free lunches. The terms of some of these zero-interest loans were not very favourable to the borrower,” the founder said.
Speaking on condition of anonymity, an India-based founder of a Y Combinator-funded company said his startup has around $120,000 stuck in SVB accounts, which it would immediately move to California-based Brex, and then work on transferring the money to India.
Also read | SVB crisis puts more than one lakh jobs in red: Y Combinator petitions US Treasury
“There is a certain level of compliance overhead in moving the money back to India through the FDI route,” the person said. An alternative route, he said, is to issue an invoice to a US-based company against the funds being transferred to the Indian entity.
Several founders indicated that the reason for a lot of startups — even those without any significant customer or vendor presence in the US — having bank accounts with SVB was that the investor would ask them to open accounts with US banks while raising funds. This entailed setting up a company in the US, of which the Indian entity would become a wholly owned subsidiary.
Payday pressure
Meanwhile, startups with operations in the US need funds immediately to pay salaries.
“The immediate thing in the US is that there is payroll to be run on March 15. Our payroll provider, Rippling, is saying that they will be able to get the funds to our employees, but as an emergency contingency, they have a backup plan to just do a wire transfer,” said Kashish Mittal, founder and CEO of Emigre, another Y Combinator company.
Also read | Nearly 60 YC-backed Indian startups have deposits stuck in Silicon Valley Bank
While a majority of Y Combinator’s India firms have their deposits in SVB, multiple growth- and late-stage software firms such as Postman and Chargebee also have various degrees of exposure to the bank. Postman didn’t respond to ET’s request for comment.
Chargebee operates with numerous banking relationships, and hence the situation at SVB will not result in any disruption to its business, cofounder and CEO Krish Subramanian told ET. “As a private company we will not be providing specifics as to our finances and banking practices. I can only confirm minimal exposure as we have numerous banking relationships,” he said.
Tiger Global-backed Innovaccer banks with SVB and currently has a minority portion of its $425 million raised capital remaining with the bank, the company told ET. It managed to pull some capital before the bank run began, chief operating officer Sandeep Gupta said, adding that effects of the SVB closure was minimal on the company.
Quick financing options
Revenue-based financing startups such as Recur Club or GetVantage are offering credit lines to the impacted companies to meet their immediate requirements.
Between Friday and Monday morning in India, Recur Club has spoken to about 120 startups whose funds are stuck in SVB, the sources said. Roughly 60 of the startups have applied for a line of credit and around 20-30% of them have been approved, they said.
“We closed 10-15 companies over the weekend. Some companies also came back to inform that they don’t need funds (after the US Fed stepped in) but broadly they also understand that until money hits the bank it is not there. In general, these companies need money. Companies realise that it is important to keep buffers. They may not draw down the entire amount,” Recur Club founder Eklavya Gupta told ET.
Bhavik Vasa, founder and CEO of GetVantage, said several startups have sent early documents to his team for funds.