Mon, Mar 13, 2023 page12

• Asian tech leaders scramble to contain SVB fallout

  • Bloomberg
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  Asia’s tech leaders, half a world away from the chaos that has engulfed Silicon Valley, are scrambling to assess the potential ramifications for an industry that has always relied heavily on US capital and connections to generate growth.

  Financiers and entrepreneurs packed the Shangri-La hotel’s ballrooms during a global Wharton School of the University of Pennsylvania alumni gathering in Singapore, huddling in groups and tables over gourmet buffet meals with the latest news on Silicon Valley Bank’s (SVB) spectacular implosion on Friday a main topic of conversation.

  In Mumbai, India, start-up founders and investors at a conference talked about nothing else, exchanging rumors about which fledgling company might be the first to fall.

  

  A man puts a sign on the door of the shuttered Silicon Valley Bank headquarters in Santa Clara, California, on Friday.

  Photo: Reuters

  In Shanghai, SVB’s local partner and joint venture, SPD Silicon Valley Bank Co (浦發矽谷銀行), issued memos within hours of each other, seeking to calm worries about their stability.

  In South Korea, the government said it would closely watch for signs of impact on the country’s financial markets and economy from the SVB collapse.

  The possibility of higher volatility and uncertainties cannot be ruled out, it said, although most officials at a gathering organized by the South Korean Ministry of Economy and Finance agreed it would likely not develop into a systemic risk.

  The situation calls for 24-hour monitoring and a prompt response, a statement issued by the ministry said.

  In the past few days, the region’s tech luminaries and family offices have watched with a mix of fear and fascination the meltdown that engulfed a decades-old bank that once carried US$200 billion of assets.

  The collapse sent shockwaves through Asia, as major investors and sovereign funds rushed to check the exposure of their portfolios and investees to the failed lender, people familiar with the matter said.

  Asia’s biggest funds, including Sequoia Capital China (紅杉資本中國), Temasek Holdings Pte Ltd (淡馬錫控股), ZhenFund (真格基金) and Yunfeng Capital (雲鋒基金), reached out to their portfolio companies to gauge how much exposure they have to SVB, said the people, who asked not to be identified discussing a private matter.

  A Sequoia Capital China representative said the company could not immediately comment, while Temasek said it does not have any direct exposure to SVB.

  Yunfeng said it notified teams to do a quick internal inquiry into potential exposure to SVB and warned portfolio companies to take action to avoid risk.

  Yunfeng itself does not have deposits with SVB, it said.

  “The impact of the SVB incident on the technology industry should not be underestimated,” China International Capital Corp (中國國際金融) analysts led by Liu Zhengning (劉政寧) said in a note.

  Deposits are crucial for tech start-ups because they generally require a lot of cash to pay for hefty expenditures, including research-and-development costs and staff salaries, they said.

  “If these cash deposits finally have to be impaired in the process of bankruptcy or restructuring, some tech firms may face high cash flow tension,” the analysts said. “The risks of bankruptcy should not be excluded.”

  Tan Finian (陳誠錦), founder of Singapore-based Vickers Venture Partners, said his company survived relatively unscathed.

  Only one of its portfolio companies in the US has deposits at SVB, totaling US$2.5 million, Tan said.

  While the direct impact to Asia is limited because of SVB’s focus on Silicon Valley, the collapse is set to affect the banking industry’s credibility.

  “This is a specialist bank. So fundamentally it shouldn’t affect Asia,” Tan said. “But confidence or the lack of it is contagious.”

  Meanwhile, the fallout from the collapse of SVB is beginning to spread around the world.

  In the UK, the leaders of about 180 tech companies on Saturday sent a letter calling on British Chancellor of the Exchequer Jeremy Hunt to intervene.

  “The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” they said in the letter seen by Bloomberg. “Many businesses will be sent into involuntary liquidation overnight.”

  This is just the beginning. SVB had branches in China, Denmark, Germany, India, Israel and Sweden. Founders are warning that the bank’s failure could wipe out start-ups around the world without government intervention.

  “This crisis will start on Monday and so we call on you to prevent it now,” British start-up founders and chief executive officers said in the letter to Hunt.
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