AFTER BUST

AS THE DUST SETTLES ON THE SILICON VALLEY BANK SAGA, INDIA’S START-UP AND INVESTOR COMMUNITIES ARE TREADING WITH CAUTION. THEIR BIGGEST LESSON LEARNT: DIVERSIFY RISKS FROM DAY ONE

- SOHINI MITTER & BINU PAUL

THE IMMEDIATE BULLET has been dodged,” serial entrepreneur K. Ganesh tells us over a Zoom call, almost a week after US regulators took receivership of Silicon Valley Bank (SVB) and backstopped all deposits, triggering a collective sigh of relief in the global start-up founder community. “But start-ups should now be more careful about where they park their money.”

Hindsight is a wonderful thing, they say. And Ganesh, who mentors and invests in young Indian startups, has no qualms about it. “Even a month ago, I would’ve said SVB is 100 per cent safe,” he says. He’s also of the view that SVB wouldn’t have unravelled so fast if not for social media and the internet. “Today news goes viral and there’s instant panic. Then there’s mobile banking, which makes it possible to withdraw $42 billion in a day. So, we need to prepare for this internet era.”

Ganesh is, of course, alluding to one of the most dramatic financial meltdowns in history. SVB, a trusted banker to the global tech ecosystem for around 40 years, saw its deposits evaporate almost overnight after some investor-types rang the alarm bells on the internet, leading to a (digital) bank run of epic proportions. By the time SVB’s assets were seized by US regulators on March 10, over 37,400 start-ups and 1,000-plus VC firms globally were staring at a liquidity crunch.

Can one adequately prepare for a Black Swan event like this?