The March 10 collapse of California-headquartered Silicon Valley Bank (SVB), the preferred bank of a significant number of U.S. venture-backed tech startups, has created upheaval in the banking sector beyond American soil.

As wavering confidence in liquidity and stability of the financial system prompted the demise of Credit Suisse, investors in Asia, particularly in the tech sector, have also been on edge, fearing being embroiled in the banking turmoil.

The impact on tech startups in Asia, however, is not clear just yet. For one, Azmul Haque, managing director at Collyer Law in Singapore, believes they are likely to be insulated from the fallout.

“Most of the startups we advise have banking relationships in Singapore and have raised money from marque global venture capital investors or Asian venture funds. While venture debt financ-ing is also popular, most startups that we represent did not raise money from SVB in the form of term loans, lines of credit or equipment financing. As such, these startups were principally banked in Singapore, with funds transferred to various operating subsidiaries (including in the U.S.) when needed,” says Haque.

For startups that did have U.S. operations, “the amount of funds banked in the U.S. were smaller (between five to 10 percent) for meeting operational expenses such as payroll and infrastructure for U.S.-based staff. Fortunately, most of these were able to transfer these funds to other bank accounts just before SVB’s collapse,” adds Haque.

But Jonathan Pentzien, Singapore managing partner at Gunderson Dettmer, admits that the development immediately sent his clients scrambling for advice.

“The concern was very high during the weekend after SVB’s collapse,” says Pentzien. “There are a number of Asian startups – probably more in India than in Southeast Asia – and venture capital (VC) funds that do have banking relationships with SVB, and there will be an impact.”

The challenges facing these startups and VC firms, Pentzien believes, are not lying with the deposits – which have been guaranteed by federal regulators in a swift intervention earlier this month. Instead, “companies that have loan facilities with SVB – whether or not they can access some of the credit lines, whether those are going to be available, how are they going to get access to those credit lines from elsewhere to the extent that the SVB loans go away – that’s probably the biggest immediate concern,” he adds.

In the short to medium term, though, startups and venture funds are confronted with difficulty finding a proper alternative to bank their capital.

“SVB was a one-of-one bank in terms of its scale and having the number of product offerings that were almost exclusively tailored to the venture and tech ecosystem. Finding banks that understand startups and the manner in which they operate, as well as venture funds and the types of investments they make, is going to present issues,” notes Pentzien, citing an already tightened funding environment under rising interest rates.

As a result, “A lot of the venture funds inevitably will have to resort to the big banks globally - whether that’s JP Morgan, Goldman Sachs, or Morgan Stanley - in order to limit the risk, and that’s potentially going to have some knockoff effects for smaller funds or startups that just aren’t necessarily going to be great candidates to bank with banks of that size,” he adds.

Although a seismic financial crisis was narrowly avoided after regulators swooped in to protect depositors and launched a separate lending facility, Haque believes SVB’s downfall has shed light on how lawyers could step up in re-examining compliance and risk controls for their startup clients in Asia.

“The most critical aspect of risk control would be to assess the impact of over-dependence on any one bank or financial institution, or finance provider, starting by assessing the impact of a potential bank run on (each of the) banks or finance providers on the startup’s business and its operations,” says Haque. “Cash can often be the lifeblood of a startup, so the impact of failing to manage this risk may be significant.”

Adds Pentzien: “With the SVB col-lapse, venture funds are probably going to continue to be careful about the investments they make and looking a lot more carefully at how startups intend to be capitalised over the short to long term.”

The priority for Pentzien now is to identify the safest alternatives for his Asia-based clients looking to move their cash elsewhere in the region.

“There are a number of very solid local Singapore banks – DBS, UOB – that to any client I’m advising I’d say, ‘look, you should really start there’, at least for the short term,” says Pentzien.

For VC funds, the focus will be on the types of terms that they seek to protect their investments in startup companies.

“Prior to the SVB collapse, a lot of companies were in a position of sufficient capitalisation where they could hold out until things turned and avoid going back to the market and have a down round. I’m not sure whether that’s going to hold and for how much longer,” says Pentzien.

As a result, “for us, a lot of the advice is going to be structuring these types of down rounds, potentially looking for those companies looking at recapitalising, and some of the terms, protective and exit provisions that we see in venture financings,” he adds.