Silicon Valley Bank collapse shakes Asian startup confidence in US banking
Silicon Valley Bank collapse shakes Asian startup confidence in US banking
Asia Tech Review: 13 March 2023
Welcome back,
Well that was quite a week. Not one but two US banks went through the throws of a death spiral before being bailed out by the US government (though nobody has explicitly used that phrase), including Silicon Valley Bank, which was popular with non-US entities including startups and funds.
I worried that whatever I wrote over the weekend would be outdated come Monday morning Asia time, let alone US time, and it proved to be true. However, the SVB saga and the collateral damage that followed replaces this week’s stories in focus, which is usually the top three highlights.
This week’s newsletter also has details on Hong Kong’s new IPO plans, Sea’s impressive quarter, Shein’s plans to list in the US and much, much more.
See you again next week,
Jon
PS: you can follow real-time news in the ATR Telegram channel here, and join the Telegram community here
Silicon Valley Bank collapse shakes Asian startup confidence in US banking
Manic weekend dims Silicon Valley’s once-dazzling shine
So the worst case scenario hasn’t come to be after the US government stepped in to save Silicon Valley Bank (SVB) with a deal that “fully protects all depositors” who can access their money from Monday.
Before this resolution—announced on Sunday US time—things looked hairy for thousands of startups who bank with SVB, a bank that’s known for being startup friendly as the name suggests. That number is not just US-based startups. SVB is a go-to for many Delaware-registered international businesses, it is used by Chinese startups for US banking (Meituan was a customer before going public) and is recommended by major investors including Y Combinator.
Indeed, YC President Garry Tan called the bank’s impending collapse an “extinction event” and suggested that one-third of YC graduated startups that banked with SVB would be unable to make payroll. Beyond the US, that potentially included dozens of India-based YC startups (according to TechCrunch) and likely others in China, Southeast Asia and other regions where YC has made a concerted push in recent years. Asia-based venture capital funds including 500 Startups are also said to have banked with SVB, according to customer lists circulating online.
While Asia-based startups tend to diversify their banking based on the location of customers, staff etc, losing access to any money at an early-stage is a major setback. One founder of a Series A startup, for example, told me that around half of their runway sat with SVB, to the tune of multiple million US Dollars. That’s money you want to keep hold off.
While these businesses look to be saved by the US government’s move, a weekend of extreme stress and disaster planning will live long in the memory and impact confidence in the US banking system.
So what does this mean?
Simply: the US, and Silicon Valley itself, may not shine so alluringly for startups across Asia. That could mean minimising their US-based banking, more actively moving money outside of the US, perhaps deprioritising business in the US and even looking to go public elsewhere.
Silicon Valley may not shine so alluringly for startups across Asia
For some, refocusing on home markets is easier. In China, the government has already made major pushes—both indirectly and directly—to encourage technology companies to list on home soil or in Hong Kong. That included the heavy-handed beating of Didi Chuxing post-US IPO, and pushing the Star Market as a tech listing platform. Just last week, Hong Kong made moves to become a more attractive IPO destination for local and Mainland companies.
International crypto companies have long avoided the US for regulatory uncertainty and banking issues, but now any remaining US-based crypto companies will think twice about their location, particularly with the “crypto-friendly” Signature Bank meeting the same fate as SVB.
The story is still very much playing out. Without further details of what will happen to both banks, the exact impact is unclear. But this weekend’s chaos has certainly removed some of the shine Silicon Valley used to project to startup audiences across the world.
The US remains the aspiration market startups want to crack for prestige and profit—with Silicon Valley the world’s de facto startup hub—though this weekend has laid bare the risks. Covid has accelerated trends that dim Silicon Valley’s dominance, such as remote working, but time will tell what the full impact is.
China
Shein is apparently looking to go public in the US in the second half of this year—first up, it aims to close $2B in fresh funding as soon as this month link
Meanwhile, Shein accused rival Temu—run by e-commerce firm PDD—of using social-media influencers to make "false and deceptive statements" against its product link
TikTok has rolled out ‘Project Clover,’ a “charm offensive” to convince European politicians that the app does not pose user data concerns link
An FT investigation found Chinese AI firms have swerved US sanctions on technology by using cloud services, agreements with third-parties and subsidiary companies link
A look at “Golden Shares”, one way China is gaining a foothold of control on some of its biggest companies—tl;dr it involves state companies taking smallish stakes that, crucially, come with a board seat and influence to guide corporate behaviour and ensure it fits with party agenda link
Baidu employees are reportedly rushing to launch the search firm’s ChatGPT equivalent in time for a publicly-communicated March 16 release date link
Huawei is eyeing success in Malaysia where the new government is reviewing previously agreed 5G plans which saw Ericsson awarded the tender to build a state-owned network link
Elsewhere in the world things remain challenging with reports suggesting Germany could ban Huawei and ZTE from parts of its 5G networks link
Sources within the chip industry told Reuters that money alone can’t overcome US restrictions, since they lack the advanced facilities of Taiwan and Korea which makes solving engineering challenges and moving up the value chain difficult link
There’s certainly lots to do: China’s chip imports slumped 27% in the first two months of 2023, according to China’s customs data—that follows volume slipping 15% last year, marking the country’s first annual fall in IC imports in two decades link
In the Netherlands, the government is planning new restrictions on exports of semiconductor technology to protect national security, thereby joining the US and its efforts to curb chip exports to China link (however the Dutch look to have fallen short of measures the US took last year)
Apple supplier Goertek said its vice-president is leaving the company just days after he sounded the alarm on the ongoing supply chain exodus from China link
Chinese studios accounted for 40 of the world’s top 100 highest revenue mobile games in January, according to Sensor Tower, reflecting steady progress from publishers like miHoYo, which produces hit title Genshin Impact link
Hong Kong
HKEX is loosening its IPO rules to enable more lists—its new “game-changer” changes will include lower prerequisite valuations, an allowance for pre-revenue companies that are valued at at least $1.8B and a focus on tech areas link
The exchange will consider five types of Big Tech firms – specialist technology companies – that qualify under the new requirements. These include companies in hi-tech sectors such as cloud computing and artificial intelligence, as well as those in the advanced hardware sector covering electric and autonomous vehicles, semiconductors and metaverse. Companies in new materials, new energy and new food and agriculture technologies are the others.
Taiwan
Google will launch a near-$10M fund to support Taiwanese media outlets link
India
A report claims Flipkart co-founder Binny Bansal is planning to invest $100-150M in PhonePe as part of its ongoing round link
Apple’s increased focus on India could result in the addition of about 120,000 new jobs in FY24, including 40,000 direct and 80,000 indirect roles concentrated on the manufacturing side with retail contributing smaller numbers link
Apple is reshuffling management of its international businesses to put a bigger focus on India link
Foxconn is said to be in discussions with the Indian government for setting up a semiconductor plant on its own, potentially without government incentives link
India’s crypto industry is under pressure—high taxes and a tricky regulatory environment have contributed to exchanges losing investors in droves link
YouTube, Facebook and Instagram gave platforms to Indian cow-protection vigilante link
In openly violent posts that often clashed with the platforms’ stated content policies, his accounts livestreamed car chases of men suspected to be transporting beef or cows—an animal deeply revered in Hinduism. He and fellow vigilantes filmed themselves ramming vehicles, shooting out truck tires and trading gunfire with alleged smugglers. The posts included anti-Muslim slurs and trophy photos of captives bleeding from the head.
Reliance Jio will buy communications equipment maker Mimosa Networks for $60M to boost its 5G and broadband services link
India intends to update its IT law, which came into force in 2000, to reflect the evolution of the internet with greater accountability from tech firms, better protection for users and more—though right now the plans are not clear link
Prosus is reportedly in talks to sell its Olx Autos business in India, Indonesia and other markets link
Southeast Asia
A leaked draft suggests the Cambodian government will expand its cyber security law to allow seizure of company computer systems and searches during loosely defined cybersecurity incidents; those who don’t comply will face prosecution link
Chinese EV maker BYD broke ground on its new factory in Thailand—media reports have suggested it is eying Vietnam and the Philippines for its next expansion link
Crypto lender Babel Finance, which had to freeze withdraws last year after it ran up an order-book deficit of $766M using customer funds, plans to restructure its business by issuing its own “recovery” coin link
Thailand offers tax breaks for companies issuing investment tokens link
Growfin raised $7.5M for its accounts receivables tracking saas product link
Sea had a promising quarter which beat expectations as revenue increased 7% YoY with Shopee’s numbers up over 30%—the firm’s share price soared by over 20% in the aftermath link
But Sea is continuing to make layoffs, cutting nearly 500 jobs from Shopee in Indonesia while GoTo is also shedding 600 employees as part of its ongoing reorg link
South Korea
South Korea’s trade minister said it will work with the US on its Chips Act to iron out what it sees as a number of onerous demands and uncertainty to Korean companies link
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