Chennai-based business software firm Freshworks has stated that its exposure to failed American lender Silicon Valley Bank (SVB) is minimal and that it has not seen any disruption. In a statement released on 13 March, Freshworks confirmed that it uses SVB for normal operations, such as receiving customer payments and processing payroll and payments to vendors.
However, the majority of its cash and marketable securities are not held at SVB. Freshworks previously worked with Silicon Valley Bank during its start-up phase but has since brought in larger, more diversified banks such as JP Morgan, Morgan Stanley, and UBS as it grew.
Freshworks, a provider of software-as-a-service (SaaS) products to over 50,000 companies, including well-known names such as Honda, Synergy, and Bridgestone, has reassured its customers that it is working with them to migrate to alternative banks and does not foresee any disruptions to its employees or customers. The announcement was made in response to SVB Financial Group’s recent decision to sell around $21bn worth of securities from its portfolio, which is expected to result in an after-tax loss of $1.8bn in the first quarter. The announcement sparked a large-scale sell-off of its shares, causing panic among investors. SVB Financial Group has relationships with over 50% of all venture-backed companies in the US, as well as several venture capital (VC) firms.
Freshworks’ announcement implies that it is taking proactive measures to ensure that its services are not affected by SVB Financial Group’s decision. By working with its customers to migrate to alternate banks, Freshworks is taking steps to safeguard its services’ continuity and maintain customer satisfaction. The reassurance provided by Freshworks is likely to be welcomed by its customers, who depend on its SaaS products to manage their operations efficiently.
SVB Financial Group’s announcement has highlighted the interconnectedness of financial institutions and the potential impact of a single institution’s decision on the wider ecosystem. As SVB Financial Group has relationships with over 50% of all venture-backed companies in the US, its decision to sell securities from its portfolio is expected to have a significant impact on the start-up ecosystem. This, in turn, has triggered a wave of panic among investors, emphasizing the importance of diversifying one’s investment portfolio to mitigate risks.
Several Indian start-ups backed by VCs, including Accel, Sequoia India, Y Combinator, and SoftBank, banked with SVB, according to sources. Industry insiders estimate that as many as 1,000 Indian start-ups may have exposure to SVB. However, Freshworks has stated that its exposure is minimal relative to its overall balance sheet and that it does not expect any disruption to its business.