Silicon Valley Bank Collapse: How IT Startups Are Feeling The Impact?

Do you know how Silicon Valley Bank collapse will impact IT sector and tech startup? Read this to know how this failure has become a nightmare for tech industry!

Shreshtha Verma
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Silicon Valley Bank Collapse: How IT Startups Are Feeling The Impact?

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The Silicon Valley Bank collapse has turned out as a bombshell that rocked the tech startups to its core. The unprecedented event has left many scrambling for solutions. With a borrower pool that had tight inter-linkages and several startups as depositors, the sudden collapse has left a trail of destruction in its wake. Reportedly, the event is going to have serious impacts on the tech spending of the IT firms.

The Ripple Effect: Silicon Valley Bank Collapse Hits IT Startup Ecosystem

The collapse of Silicon Valley Bank has left a significant impact on the IT startup sector, with repercussions that could extend beyond it. According to industry experts, the failure could result in enterprise clients re-evaluating their IT spending decisions, potentially causing a slowdown in the tech industry.

As a result of the SVB failure, many IT firms are facing decreased credit and financing options, leading to cash crunches and delayed investments in new technologies. The long-term effects of the collapse are uncertain, and businesses will need to navigate the new financial landscape to remain competitive.

Wedbush Securities Note On SVB Failure

As the dust settles, the aftermath of the Silicon Valley Bank crisis has started to become apparent. A leading wealth management, brokerage and advisory firm, Wedbush Securities, has released a note warning that the repercussions could go beyond the startup sector. The note suggests that enterprise clients may start to reevaluate their IT spending decisions in the wake of the collapse.

The impact of Silicon Valley Bank's failure has led to a decrease in available credit and financing options for many IT firms, resulting in cash crunches and delayed investments in new technologies. This could lead to a potential slowdown in the tech industry as a whole, with businesses needing to reassess their financial strategies to remain competitive.

The fallout from Silicon Valley Bank's collapse is far-reaching, and its ripple effect could have a lasting impact on the tech industry for years to come. As businesses continue to navigate this new reality, only time will tell how they will adapt to the new financial landscape.

A Nightmare For Tech Startups

Infact, the consequences of this collapse on the tech industry are expected to be more significant than previously anticipated, according to Wedbush Securities. The bank's failure could result in longer sale cycles and delayed budget cycles for the calendar year, which may cause a considerable slowdown in the industry.

The delay in budget cycles is occurring in a macro environment that has been challenging, with many companies reporting extended cycles and increased cost optimization deals. The note highlights that BFSI and high-tech verticals will be most affected, with BFSI accounting for 20-40% of the sector's revenues. The high-tech industry, which is already facing headwinds, may experience a more significant impact. This delay in investments in new technologies could cause a slowdown in the industry as a whole.

The note states, "Collectively, we believe these factors are impacting funding for committed engagements in both cost optimization (run the operation) as well as transformational (grow the operation) areas. As funding challenges continue beyond the March quarter, the note said that it is now expected that there will be more back-end loaded contribution from digital-based services, and that Wedbush believes funding decisions have been pushed out despite most vendors pointing to a strong deal pipeline particularly in cost optimization deals."

Silicon Valley Bank's collapse leads to more uncertainty, creating a potentially more cautious spending outlook in the financial services vertical, and in the high-tech vertical, "cost-cutting initiatives may create even more material growth headwinds."

Potential Guidance Risks for Accenture, Infosys, & Cognizant

Wedbush Securities expects that Accenture's FY23 guidance may be at risk, as the company has higher exposure to discretionary spending, including consulting (5-10% of the mix), and digital (40% of the mix, excluding cloud). For Infosys, Wedbush expects guidance for FY24 to be in the 8-10% range, with 45% of the company's revenue mix from digital and 55% from cost optimization services. Finally, Cognizant is expected to experience a decline in CY23 on-year growth, excluding any significant deal wins and the company's exposure to BFSI and the communication, media, and technology (CMT) verticals, which account for almost 50% of its revenues.

Timeline Of Silicon Valley Bank Failure

Here you can see a visual representation of how Silicon Valley Bank collapsed in just 48 hours!