This came barely two days after SVB announced it was conducting a share sale to cover up for the faster-than-expected decline it was witnessing in deposits. Following the news, both investors and customers of the bank started jumping off a sinking ship.
What happened at SVB? Early Thursday, the SVB Financial Group announced it was raising $2.25 billion in a share sale in addition to having sold $21 billion worth of securities from its portfolio. The company also said that it booked a massive after-tax loss of $1.8 billion on sales of these investments.
What caused this? With the US Federal Reserve raising interest rates aggressively to rein in inflation, the value of existing bonds that were issued at lower interest rates has fallen. Banks, which bought these bonds, are, as a result of the falling values, sitting on steep unrealised losses. Another facet of the rising interest rates was the decline in funding for startups as the venture capital ecosystem took its foot off the gas pedal.
Also read: ETtech Explainer: how rising US interest rates caused a pincer movement on Silicon Valley Bank
Is there an India angle? Indian investors and SaaS startups are rattled by the developments in the US. While some are closely tracking the developments, others have started moving their deposits out from SVB. “We moved 90% of our money from SVB to Brex in the first half of Thursday–I did it even before recommendation of VC funds,” Lightspeed-backed Rephrase.ai founder and CEO Ashray Malhotra told ET. New-age lenders Mercury and Brex have come up to be platforms of choice for most early-stage SaaS startups.
Also read: ETtech In-depth: Silicon Valley Bank meltdown puts Indian SaaS firms on alert
What happens next? Late Friday, the US Federal Deposit Insurance Corporation (FDIC) said that SVB was closed by the California Department of Financial Protection and Innovation. “To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank,” it said.
The FDIC will sell the assets of SVB, while the DINB will maintain its normal business activities. While the insured depositors of SVB will receive their insured deposits, the uninsured depositors in the bank will be paid dividends from the asset sale.
Here are some of the top stories of the week.
Scoop: Flipkart founder Binny Bansal in talks to invest $100 million in PhonePe | Flipkart cofounder Binny Bansal is in talks to invest about $100-150 million in PhonePe as part of an ongoing financing round at the digital payments company, people in the know said. The transaction, if it goes through, will be among the largest individual investments in a new-age firm, similar to the $100 million bet taken by Flipkart’s other founder Sachin Bansal in Ola during 2018.
Exclusive: Govt developing platform to auto-update docs via DigiLocker, Aadhaar: The government is developing a platform to help citizens who store their documents in DigiLocker to auto-update their address and other demographic details across departments through Aadhaar, officials told us.
ETtech In-depth: How BluSmart plans to fight the Uber, Ola onslaught | The Electric Vehicle (EV) based ride-hailing story, which began unsuccessfully with an $8 million foray by Ola in the Western city of Nagpur in 2017, has lately seen renewed action with dominant players Ola and Uber planning big moves even as startups like BluSmart have flipped the typical model of cab-aggregators.
India in Focus
SoftBank’s Masayoshi Son meets top startup founders, CEOs on India visit: SoftBank Corp founder and chief executive Masayoshi Son met top Indian startup founders and CEOs on his day-long visit to New Delhi on Tuesday, including Paytm founder Vijay Shekhar Sharma, Flipkart group CEO Kalyan Krishnamurthy and Lenskart cofounder Peyush Bansal. Son also attended the wedding reception of Oyo founder Ritesh Agarwal on Tuesday, people in the know said.
India to top China as largest international market in 2023, says Walmart CFO: India is likely to surpass China and emerge as the largest international market for Walmart this year, CFO John David Rainey said.
Sebi mulls permanent capital vehicles for long funding: Amid allegations of fierce valuation games that drive startups to dress up numbers and venture capitalists to spin stories to investors, the idea of permanent capital vehicles (PCVs) to offer long, patient funding to unlisted outfits of Indian entrepreneurs is being explored.
Fintechs meet finance ministry officials to flag 20% levy on remittances under LRS: Founders and senior executives of new-age stock investing platforms such as IndMoney, Vested Finance, and Stockal met officials in the finance ministry on Monday to discuss the possible implications of a proposed 20% levy on foreign remittances under the Liberalised Remittance Scheme (LRS) for retail investors investing in US equity instruments, two people aware of the discussions told us.
Good Glamm group hikes stake in The Moms Co to 90%: The Good Glamm group, a beauty and personal care-focussed ecommerce roll-up platform, has increased its stake to 90% in direct-to-consumer (D2C) mother- and baby care brand The Moms Co. It had acquired a 75% stake in the firm in 2021.
Tweet of the day
IT and Tech policy
Digital India Bill draft post consultation to be ready by July: The draft Digital India Bill, which will replace the Information Technology Act, 2000, is likely to be ready by early July, sources told ET. There will be at least two more consultations on the principles of the Bill by March 20, and the draft consultation will last 90 days, they added.
Finance ministry revises anti-money laundering law, crypto to be under PMLA | Crypto exchanges and intermediaries dealing with virtual digital assets will now be required to perform KYC of their clients and users of the platform. As per the latest change, an entity dealing in virtual digital assets will now be considered a ‘reporting entity’ under the Prevention of money laundering Act (PMLA).
Spacecom policy notifications soon, may specify FDI limits: The Spacecom policy, likely to be notified in a couple of months, may set multiple foreign direct investment (FDI) limits for key businesses in the sector, with highest foreign ownership likely to be permitted in satellite broadband services to attract global investors.
ET Ecommerce Index
We’ve launched three indices – ET Ecommerce, ET Ecommerce Profitable, and ET Ecommerce Non-Profitable – to track the performance of recently listed tech firms. Here’s how they’ve fared so far.
ETtech Done Deals
Fintech unicorn Slice picks 5% in North East Small Finance Bank: In what is possibly the first time a new-age fintech venture is investing in a bank, Tiger Global-backed fintech firm Slice picked up a 5% stake in North East Small Finance Bank, multiple sources aware of the matter said.
ETtech Deals Digest: startups pick up $140 million this week as funding nosedives 90% YoY | Indian startups received $140 million in funding over the week across 20 rounds, 90% lower compared to the same period last year when $1.43 billion came in as across various companies, according to data from market intelligence firm Tracxn.