From Shanghai to Mumbai, tech chiefs race to contain Silicon Valley Bank fallout

HONG KONG – 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 supercharge growth.

In the past days, the region’s tech luminaries and family offices have watched with a mix of fear and fascination the meltdown that engulfed the decades-old Silicon Valley Bank (SVB), which once carried US$200 billion (S$270 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, according to people familiar with the matter.

At an investment firm that backs ByteDance, executives were glued to their screens as they monitored SVB’s stock price and news headlines on Thursday night in Beijing, before deciding overnight to pull their funds out of the bank.

Others were not so lucky.

An Indian founder told Bloomberg News that he failed to retrieve company funds and is now left only with working capital.

Another was scurrying to stop and reroute customer payments into his company’s SVB account, while also setting up new arrangements for salary payments.

Asia’s biggest funds, including Sequoia Capital China, Temasek, ZhenFund and Yunfeng Capital, reached out to their portfolio companies to gauge how much exposure they have to SVB, according to the people, who asked not to be identified discussing a private matter.

Temasek said it does not have any direct exposure to SVB.

Yunfeng, which does not have deposits with SVB, 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.

Analysts at China International Capital Corp said in a note: “The impact of the SVB incident on the technology industry should not be underestimated.”

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

“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.”

SVB became the biggest US lender to fail in over a decade after a tumultuous week that saw an

unsuccessful attempt to raise capital and a cash exodus

from the tech start-ups that had fuelled the bank’s rise.

Regulators stepped in and seized it on Friday in a stunning downfall for a lender that had quadrupled in size over the past five years and was valued at more than US$40 billion as recently as last year.

SVB’s troubles are raising concerns particularly in China because its joint venture with Shanghai Pudong Development Bank – SPD Silicon Valley Bank – has been aggressively lending to start-ups and funds that cannot borrow from traditional banks, according to people familiar with the matter.

While the venture has sought to reassure its clients and portfolio companies, the extent of the damage for now remains unclear. BLOOMBERG