Silicon Valley Bank Fallout Shakes Confidence at Asian Startups

“The

SVB

problem is an episode that reminds us to review our reliance on investment from the U.S.,” said Wang Guanyan, an executive of a Guangzhou, China-based startup that develops virtual-reality games.

Mr. Wang said his company planned to transfer some money they deposited at SVB back to China or Singapore, where they also run a studio. His company had already been cautious about receiving U.S. dollar funds because of concerns around tighter scrutiny on investment in Chinese technologies, he said.

“Still, for small companies like us, we probably don’t have the luxury to be picky about who we take money from, especially with the challenging macro conditions,” Mr. Wang said.

On Sunday, the U.S. Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. guaranteed all deposits of SVB, which collapsed after an attempt to raise capital led to a bank run.

SVB had proved popular with many Asian startups, especially Chinese companies in the biotech field and those with the variable-interest-entity structure, startup executives and analysts said.

With SVB’s collapse, “those startups lose an important financing channel and need to find other ways to raise money, especially from U.S. dollar funds,” said Xinyao Wang, a healthcare equity analyst.

SVB has offices in Beijing, Shanghai and Hong Kong. In 2004, SVB led a delegation of U.S.-based venture capitalists including Sequoia Capital founder Don Valentine to China to explore investment opportunities and network with Chinese entrepreneurs.

In 2012, it established a joint-venture bank in the country with the

Shanghai Pudong Development Bank,

called SPD Silicon Valley Bank. The bank targets clients in areas such as life sciences, healthcare and advanced manufacturing and offers services including loans as well as yuan financing for offshore companies.

SPD Silicon Valley Bank said in a statement on Saturday that it has been operating in a stable manner with an independent balance sheet.

At least a dozen Hong Kong-listed companies, including many in biotechnology, said in exchange filings that they have banked with SVB. Many of them said the cash they held with Silicon Valley Bank was immaterial.

Among those more heavily exposed was

BeiGene Ltd.

, a biotech company developing cancer treatment drugs. BeiGene has uninsured cash deposits at SVB worth about 3.9% of its $4.5 billion cash holdings, which would be equivalent to around $175.5 million, it said in a stock exchange filing on Monday.

BeiGene also said it doesn’t expect the SVB-related developments to significantly impact its operations. It has diversified its cash and investment positions across several large financial institutions including

JPMorgan Chase

& Co., Morgan Stanley and UBS Group AG, it said.

In India, home to some of the world’s most highly valued startups, the country’s minister of state for technology,

Rajeev Chandrasekhar,

said on Twitter Monday that startups should learn from the crisis and trust India’s banking system more. The U.S.’s move to back all deposits at SVB meant looming risks to Indian startups had passed, he said.

“You need the certainty of having money in the bank,” said Srikrishnan Ganesan, the Chennai, India-based co-founder and chief executive of software startup Rocketlane, which has staff in the U.S. and in India.

The startup, which was founded in 2020 and has raised $21 million, had between 16% and 17% of the cash it keeps in the U.S. in SVB, using it for matters such as payroll for U.S. staff. Mr. Ganesan was able to transfer the funds to another bank last week, just before SVB’s collapse.

Mr. Ganesan said early-stage startups based in India and elsewhere that received funding in the U.S. recently but hadn’t had time to transfer it out of SVB would be especially vulnerable. One lesson he has learned is not to have too much concentration of capital in any one institution, and not to depend too much on any single vendor or supplier, he said.

Jensen Ye, the 43-year-old co-founder of a startup that provides blockchain encryption services, said his company received a new investment of $7 million from a U.S.-based fund in December and deposited it with SVB. The startup—which was originally founded in China and is now based in Singapore—planned to use the proceeds to pay staff salaries and expand operations in the city state, he said.

Mr. Ye said he has tasked colleagues in California to approach two bigger banks to store their money.

“I didn’t even think that it was unsafe that we put all our eggs in one basket, because I felt like it was a concrete basket,” he said.

Write to Raffaele Huang at [email protected], Newley Purnell at [email protected] and Clarence Leong at [email protected]

“The

SVB

problem is an episode that reminds us to review our reliance on investment from the U.S.,” said Wang Guanyan, an executive of a Guangzhou, China-based startup that develops virtual-reality games.

Mr. Wang said his company planned to transfer some money they deposited at SVB back to China or Singapore, where they also run a studio. His company had already been cautious about receiving U.S. dollar funds because of concerns around tighter scrutiny on investment in Chinese technologies, he said.

“Still, for small companies like us, we probably don’t have the luxury to be picky about who we take money from, especially with the challenging macro conditions,” Mr. Wang said.

On Sunday, the U.S. Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. guaranteed all deposits of SVB, which collapsed after an attempt to raise capital led to a bank run.

SVB had proved popular with many Asian startups, especially Chinese companies in the biotech field and those with the variable-interest-entity structure, startup executives and analysts said.

With SVB’s collapse, “those startups lose an important financing channel and need to find other ways to raise money, especially from U.S. dollar funds,” said Xinyao Wang, a healthcare equity analyst.

SVB has offices in Beijing, Shanghai and Hong Kong. In 2004, SVB led a delegation of U.S.-based venture capitalists including Sequoia Capital founder Don Valentine to China to explore investment opportunities and network with Chinese entrepreneurs.

In 2012, it established a joint-venture bank in the country with the

Shanghai Pudong Development Bank,

called SPD Silicon Valley Bank. The bank targets clients in areas such as life sciences, healthcare and advanced manufacturing and offers services including loans as well as yuan financing for offshore companies.

SPD Silicon Valley Bank said in a statement on Saturday that it has been operating in a stable manner with an independent balance sheet.

At least a dozen Hong Kong-listed companies, including many in biotechnology, said in exchange filings that they have banked with SVB. Many of them said the cash they held with Silicon Valley Bank was immaterial.

Among those more heavily exposed was

BeiGene Ltd.

, a biotech company developing cancer treatment drugs. BeiGene has uninsured cash deposits at SVB worth about 3.9% of its $4.5 billion cash holdings, which would be equivalent to around $175.5 million, it said in a stock exchange filing on Monday.

BeiGene also said it doesn’t expect the SVB-related developments to significantly impact its operations. It has diversified its cash and investment positions across several large financial institutions including

JPMorgan Chase

& Co., Morgan Stanley and UBS Group AG, it said.

In India, home to some of the world’s most highly valued startups, the country’s minister of state for technology,

Rajeev Chandrasekhar,

said on Twitter Monday that startups should learn from the crisis and trust India’s banking system more. The U.S.’s move to back all deposits at SVB meant looming risks to Indian startups had passed, he said.

“You need the certainty of having money in the bank,” said Srikrishnan Ganesan, the Chennai, India-based co-founder and chief executive of software startup Rocketlane, which has staff in the U.S. and in India.

The startup, which was founded in 2020 and has raised $21 million, had between 16% and 17% of the cash it keeps in the U.S. in SVB, using it for matters such as payroll for U.S. staff. Mr. Ganesan was able to transfer the funds to another bank last week, just before SVB’s collapse.

Mr. Ganesan said early-stage startups based in India and elsewhere that received funding in the U.S. recently but hadn’t had time to transfer it out of SVB would be especially vulnerable. One lesson he has learned is not to have too much concentration of capital in any one institution, and not to depend too much on any single vendor or supplier, he said.

Jensen Ye, the 43-year-old co-founder of a startup that provides blockchain encryption services, said his company received a new investment of $7 million from a U.S.-based fund in December and deposited it with SVB. The startup—which was originally founded in China and is now based in Singapore—planned to use the proceeds to pay staff salaries and expand operations in the city state, he said.

Mr. Ye said he has tasked colleagues in California to approach two bigger banks to store their money.

“I didn’t even think that it was unsafe that we put all our eggs in one basket, because I felt like it was a concrete basket,” he said.

Write to Raffaele Huang at [email protected], Newley Purnell at [email protected] and Clarence Leong at [email protected]