The Silicon Valley Bank contagion is unlikely to affect fundraising for Southeast Asia startups, VCs say

The collapse of Silicon Valley Bank (SVB) on Friday afternoon left venture capital firms, tech companies, and startups scrambling in uncertainty. Then over the weekend, the FDIC, Treasury, and the Federal Reserve stepped in to reassure depositors their cash is safe, regardless of the deposit amount.

The decision was celebrated by the majority of people, and it likely will help mitigate a widespread bank run. The question many in the tech industry and startup world is: What impact would this crisis have on startup fundraising going forward? While experts are still trying to digest the SVB’s fallout on VC firms and tech startups in the United States, venture capitalists are saying the crisis is unlikely to affect fundraising for Southeast Asia startups.

“I think [the impact on fundraising is] a watch out, but I don’t think that contagion spreads,” David Gowdey, managing partner at Southeast Asian venture capital firm Jungle Ventures, said in an interview with CNBC’s “Squawk Box Asia” on Tuesday.

“I think Secretary Yellen and the government did a fantastic job of stepping in and taking away a lot of that risk, creating a lot of stability in the markets,” he added.

Gowdey said that although Silicon Valley Bank was the firm’s primary bank, however, the exposure to the bank was not large. “We pull a lot of that money into Southeast Asia, into Singapore banks. And so for us, the exposure to SVB was not large,” he added.

Another venture firm, Golden Gate Ventures, which also invests in Southeast Asian startups, said the SVB fallout is an opportunity for the region.

“This has actually been helpful to Southeast Asia. It now looks like a golden child to U.S. investors. Investors are starting to say: I want to diversify to different bank accounts, different geographies, different currencies,” Vinnie Lauria, managing partner at Golden Gate Ventures, told CNBC’s “Street Signs Asia” on Tuesday.

“And this is where Southeast Asia has the time to shine, in light of the situation,” added Lauria. When CNBC asked if the situation makes fundraising more difficult, Gowdey said funds in Southeast Asia are well capitalized.

“I think it’s being selective because of the macro environment. [Accessing] the capital will get harder, but the capital is there and it’s getting deployed,” Gowdey said.

Silicon Valley Bank (SVB) is the US’s 16th largest bank that mostly served venture capital firms and tech companies and startups, including some of Silicon Valley’s biggest names, such as Roku. With over 200 billion dollars of assets, Silicon Valley Bank is heavily focused on the tech industry having funded early-stage startups including Airbnb, Uber, Square, and others. SVB’s collapse is the largest U.S. bank failure since the 2009 financial crisis.

Silicon Valley Bank’s downward spiral began late Wednesday after the bank surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. This news quickly caused SVB’s share price to lose more than 60 percent of its value the next day and another 60 in the aftermarket.

Within 48 hours, a panic induced by the very venture capital community that SVB was created to serve and cared for ended. On the same day, the US regulators seized control of the bank. Yesterday, the US government guaranteed Silicon Valley Bank customers will have access to all their deposits starting Monday, March 13.

Why did Silicon Valley Bank collapse?

SVB has been profitable for over a decade and was also a major beneficiary of the tech bull run over the past 10 years with its share price having risen almost 20-fold between 2009 and its peak in 2021. The question many are asking is: Why did Silicon bank Valley collapse all of a sudden and who’s to blame for the downfall?

Founded in 1983 and headquartered in Santa Clara, California, Silicon Valley Bank (SVB) was a commercial bank that primarily serves the technology, life science, and venture capital industries because most traditional banks avoided tech startups and viewed them as too risky. The bank offers a range of financial services, including commercial banking, investment banking, and asset management to companies in the innovation sector.

Over the years, SVB became the go-to bank for venture capital funds that deposited their cash with the bank. The boom came in the early 2010s during the low-interest rate environment that created a gold rush for the venture capital industry investors who were pumping hundreds of billions of dollars into VC funds, and much of this cash found its way onto SVB’s balance sheet.