SVB Fallout: Chargebee and Freshworks Have Minimal Exposure to SVB Collapse Amidst Increasing Fear Among Indian Startups
After SVB collapsed the last week, there were speculations in social media that these SaaS companies could have extensive exposure with the bank. he companies' exposure to SVB is minimal, which is relative to the present balance sheet. They were working with customers and vendors utilizing their SVB accounts to shift to other bank accounts.
Freshworks and Chargebee- the Chennai-based companies that operate like Software as a Service provider companies carry out a transaction with SVB but have minimal exposure with the startup.
After the bank collapsed the last week, there were speculations in social media that these SaaS companies could have extensive exposure with the bank.
Chargebee’s CEO has addressed the situation and stated that the company does not have disruptions. They have looked for alternatives and covered the aspects with the practices of treasury management that have been there for some time. The response came after the company was questioned if they were impacted by the Silicon Valley Bank’s collapse.
He has further added that they have diversified across various banks while they conducted operations with the SVB. They do not have much exposure except they conduct regular transactional activities with the Silicon Valley Bank, which they are shifting to other banks.
Chargebee deals with the end-to-end revenue management platform for businesses, and it employs a subscription model utilized globally by 4500 customers. The customers involve Fujitsu and Freshworks, according to the information taken from the website.
Chargebee has raised a total funding of 468.2 million USD across eight funding rounds. It involves a valuation of 250 million USD led by Sequoia Capital India and Tiger Global Management in February 2022.
Freshworks, which is listed on the Nasdaq index has addressed in a statement about its exposure to the Silicon Valley Bank, stating that it has been a customer of the bank since the initial years. As the company expanded, it started operating under many diversified banks such as JP Morgan, Morgan Stanley, and UBS.
They have even added that the SVB does not hold the majority of cash and marketable. The company utilizes Silicon Valley Bank and several other banks for conducting regular operations like receiving payments from customers, processing payroll, and payments to vendors.
The company’s exposure to SVB is minimal, which is relative to the present balance sheet. They were working with customers and vendors utilizing their SVB accounts to shift to other bank accounts.
The statement stated that Freshworks does not see any disruption to the employees or customers.
Over 50,000 customers use Freshwork’s SaaS service to enable a better customer experience globally. Some of its customers include Synergy, Honda, and Bridgestone, according to its website.
SVB Collapse has caused Indian startups to move their US deposits:
Presently, Indian startups are looking for options to reduce their exposure to different US banks because they are fearing a broader impact on the US financial sector after the collapse of the SVB. There has been a constant fear of the same trend happening in Indian institutions as 100 startups have exposure to SVB.
Fintech companies have shared with media sources that theta re already receiving interest from Indian startups to shift their funds to local banks or initiate alternate US accounts. Karun Arya, the Chief Growth Officer at GetVantage has talked to the media sources about the matter, stating that they are working closely with the Indian banking partners to enable businesses impacted by the collapse of SVB to quickly open a US bank account to redirect their future revenues securely without any disruption.
According to the executive of Razorpay, which has helped Indian startups to urgently shift their funds to Indian banks as recorded that multiple startups have approached the help desk to avail of the services.
The SVB collapse directly impacts the Indian startup’s ability to access any capital deposited with the bank. Several fintech companies have created a line of credit or funds that can be used by Indian startups to avail the employees. According to various data, it has been found that around 22 Indian startups have 1 billion USD in exposure to the SVB. 40 startups have their fund accounted for 250,000 USD to 1 million USD, and 33 startups have been found to have deposits of less than 250,000 USD.
After the SVB Financial Group was inspected by US regulatory authorities, financial stocks, and global stocks took a massive hit. It was followed by a rapid decline in its stocks, resulting in a market loss of USD 80 billion.
As a result of the situation, Silicon Valley Bank has become the largest bank failure in the United States in recent years. The SVB crisis occurred within 48 hours of the bank’s announcement that it was planning tortoise funds to close the gaps in its balance sheet. It triggered a massive selloff and shook clients’ and depositors’ confidence.
SVB had to halt its fundraising plan as depositors panicked, but the damage had already been done.
California regulators shut down the tech and startup-focused financial lender. The former has been placed under the supervision of the United States Federal Deposit Insurance Corporation.
The shock comes on the heels of another, in which SVB’s premarket trade dropped by 60%. It frightened the depositors.
The SVB financial group was looking for a way to sell the stakes, but following a failed fundraising attempt, the deposits were withdrawn too quickly. Following the onset of the crisis, the company even informed its employees that they would be working from home until further notice.
edited and proofread by nikita sharma