SVB's collapse serves as a cautionary tale for startups and financial institutions alike

The US banking authorities closed down the Silicon Valley Bank (SVB) Financial Group, shocking the startup scenario. The US Federal Reserve is the major reason behind the demise of the SVB, as they raised interest rates, which contributed to the collapse of the SVB by making investors less willing to take risks. As a result, investors began to withdraw funds from SVB to meet their cash needs. The startup community has been completely struck ever since the collapse because many businesses relied on its financial services. All over the world, news suggests that several factors contributed to SVB's decline. Some SVB clients are now struggling with money problems as a result of the US Federal Reserve raising interest rates.

SVB's demise impacts Indian startups relying on their financial services

Latest business update: SVB announced a stock sale and lost money on that sale of its bond portfolio, but the stock deal fell through, and SVB entered receivership. Almost all of SVB's securities that were up for sale, the majority of which were US Treasury securities, were losses, and this all was done just as a response, which made the organization obsolete.

In 2020–2021, when interest rates were low, SVB invested the money it received from deposits into long-term Treasury bonds; however, as rates started to rise, the value of these bonds declined below what SVB paid. Due to this, depositors asked for withdrawals, and there are worries about the possibility of bank runs. SVB Financial Group's failure has caused a standstill for not only the financial industry but also the startup scene.

According to recent business news, SVB made it simple for Indian startups to save money by enabling businesses to open bank accounts without the requirement for a Social Security number or an Income Tax Identification Number from the United States. The loss of SVB's services might make it harder for Indian startups to manage their finances and raise money.

This serves as a reminder of the significance of financial stability and the demand for effective risk management procedures in the financial sector. It also emphasizes the importance of startups attaining dependable and stable financial services to foster their development and success. This incident acts as an encyclopedia, helping emerging businesses understand the value of prudent risk management practices, particularly in the financial industry. It also emphasizes how important it is for decision-makers to carefully consider how their actions will affect the financial system and the overall economy.