The collapse of Silicon Valley Bank (SVB) has sparked concerns in Southeast Asia about the impact it could have on the regional tech landscape. The short answer: if you were an SVB customer, then yes. For everyone else, the effects may be more indirect – but not necessarily in a bad way.
Many analysts have come to a consensus that SVB’s demise is unlikely to have a major contagion effect due to Southeast Asia’s superior growth prospects.
Qin En Looi of Saison Capital stated that the majority of local tech startups are likely to escape any direct impact. However, he also said that Southeast Asia’s funding activity could take another hit amid an already-challenging macroeconomic environment.
VCs a victim
Some VCs based in Southeast Asia, such as Jungle Ventures and Golden Gate Ventures, were clients of SVB. These firms may face challenges in finding another bank that offers the same product offering as the collapsed SVB, according to venture capital firms in the region.
David Gowdey, managing partner at Jungle Ventures, said to CNBC that SVB provided a “very strong product offering” for them and other VC firms.
Despite this, the collapse of SVB could actually be beneficial for Southeast Asia. Investors are now looking to diversify their bank accounts, geographies, and currencies. As a result, Southeast Asia is increasingly being seen as a golden child to US investors, according to Vinnie Lauria, managing partner at Golden Gate Ventures.
In an interview with CNBC, Lauria said that startups in the region are buffered, and most of the space is isolated from the SVB incident.
Guards up for Southeast Asia
There have been several statements of reassurance from across the region’s tech sector. Startups in the region have continued to communicate to their customers since Sunday evening that their funds are in good hands and not in SVB accounts, according to DealStreetAsia.
However, William Pesek of Asia Times believes that the collapse of SVB is triggering Asia’s post-traumatic stress disorder over Fed austerity from the late 1990s.
“The mini-panic on global markets suggests many aren’t buying the SVB-is-an-isolated-case argument. That has economists at Barclays Plc thinking the Fed rate that had been widely expected later this month is now on hold,” he said.
Pesek said that while few think the SVB collapse will trigger another global financial crisis, it is obvious that Asian officials are worried about a repeat of the region’s 1997 financial crisis.
Overall, the collapse of SVB serves as a reminder that it’s hard to predict the market and individual companies. In his recent op-ed for Disruptive.Asia, Jouko Ahvenainen reiterates the importance of proper diversification and risk management in understanding how events in one place can create risks for individuals and entities that may be remotely connected to these events.