Even in Asia, SVB Trauma May Linger for Awhile

Thousands of miles away from California, the Silicon Valley Bank fiasco is reverberating still. But first...

Today’s must-reads:

• Some SVB clients regained account access

• DeFi lender was hit by a $197 million hack

• Zuckerberg was warned about social media addiction

Invisible contagion

In the space of a handful of days, a US bank has gone from relative obscurity to overshadowing the Oscars and AI chatbot hype. Silicon Valley Bank roiled startups all over the world with its sudden collapse. Now founders and investors, already shell-shocked after years of painful cutbacks, are wondering how deep the wounds run.

Like everyone else in the industry, Asia’s tech chieftains spent a sleepless 48 hours trying to retrieve funds, exchanging (sometimes spurious) information, brainstorming ways to keep doing even basic things like paying employees. While the Fed later intervened to avert a potential crisis, that experience is likely to stay with them for a long time. As Vickers Ventures partner Finian Tan  our colleagues: “Confidence, or the lack of it, is contagious.”

Contagion is what everyone now fears. Most immediately, SVB’s meltdown is likely to at least slow the pace of investment and fundraising over the coming months, said David Chang, founding partner of Hong Kong-based investment firm Mindworks. Founders, if nothing else, will be scrambling to set up new bank accounts. A far bigger question may be whether other banks fail — or dramatically pull back from supporting money-losing startups.

It’s the last thing they needed — one more fount of uncertainty after a trying two years that in some ways had irrevocably altered the VC landscape. 

Tech firms were already in full-on self-preservation mode: Southeast Asia’s Sea Ltd. and GoTo Group are cutting hundreds of jobs, South Korea’s Coupang Inc. is replacing humans with robots, and every startup in SoftBank Group Corp.’s investment portfolio is on notice to accelerate its path to profitability.

Giants of the VC world like Sequoia Capital have gone from having a “red pill moment” about crypto and pouring money into dubious blockchain projects to writing memos startups to shape up their balance sheets or perish.

SoftBank shares lost more than $7 billion of their value in three trading days after the SVB closure, even with the Japanese investment firm publicly saying its portfolio companies had little direct exposure. That drop is telling, given SoftBank is the backer of some of the world’s biggest and best-known startups.

Privately, VCs and startups around the region we’ve spoken to appear to have gotten over the worst of the trauma. Sumir Verma, managing director at Merisis Advisors Pvt, called SVB’s demise a “sad moment” for India — but stopped short of outlining more severe fallout. Eugene Zhang, founding partner of Silicon Valley-based early-stage fund TSVC, told us he managed to get just $1 million of his funds out of SVB — leaving tens of millions locked up — then celebrated when news of the Fed backstop broke.

For now, many similarly bleary-eyed VCs are celebrating the ostensible end of a days-long nightmare. Whether the scars from that ordeal remain with them for the longer term is an open question.

The big story

OpenAI needed a powerful supercomputer to develop ChatGPT. So Microsoft, which invested $1 billion in the company in 2019, built such a machine — by stringing together tens of thousands of graphic chips.

Get fully charged

SoftBank is getting wary looks from investors in the wake of Silicon Valley Bank’s collapse

Nearly 200 companies worldwide that received loans from SVB are now on the hunt for new lenders

Silver Lake is part of a group of investors that will buy software developer Qualtrics at a $12.5 billion valuation

A Chinese self-driving startup filed confidentially for an initial public offering in the US

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— With assistance by Lucy Papachristou