Picture credits: Tim Dechant / TechCrunch
The sudden collapse of Silicon Valley Bank, which has served as a powerhouse for startups, is also impacting businesses 8,000 miles away.
Dozens of young Indian startups backed by YC, Accel, Sequoia India, Lightspeed, SoftBank and Bessemer Venture Partners have done business with Silicon Valley Bank, sometimes as their only banking partner, and have been unable to withdraw the money on time, several people familiar with the situation said.
Venture capitalists are cautious about disclosing the names of affected startups for fear that it could impact startups’ prospects for raising capital in the future. Regulators stepped in on Friday to shut down Silicon Valley Bank, the 16th largest in the United States and the bank for most startups.
Some Indian companies were unable to transfer their funds from Silicon Valley Bank in a timely manner because they did not have another US bank account readily available, many venture capitalists have recounted.
Many Indian startups are incorporated in Delaware to make it easier for them to raise capital from US venture capital firms such as Y Combinator. Some SaaS companies are registered in the United States because even though they are operating from India, they want to serve international markets and want to be considered an American company.
And for many companies that “flipped” their US headquarters from India, Silicon Valley Bank was the preferred choice, said another person familiar with the matter, pointing to the fact that many events in India were sponsored by SVB as principals of the lender. pushed to increase ties with Indian companies.
Almost all Indian SaaS startups with a big presence in the United States have done business with Silicon Valley Bank, said a partner at one of the leading venture capital funds. More than a dozen Indian SaaS unicorns and many more “sounicorns” are headquartered in the US
Many of these start-ups have not diversified their funds across multiple banks because initially it is usually not possible to increase administrative and operating costs.
A US-based investor, who requested anonymity speaking candidly, said he was well aware that many Indian companies had around $4-10 million parked in their SVB accounts. A group of Indian YC founders surveyed members about their exposure to SVB and found that more than 60 companies had more than $250,000 parked in SVB, according to results seen by TechCrunch.
Indian SaaS startups and YC-backed ones that set up their businesses in the US and raised their first daughter there often had SVB as their default bank, Ashish Dave, Indian Director of Mirae Asset, tweeted. “Uncertainty kills them. Growing ones are relatively safer because they diversify.
Garry Tan, president of Y Combinator, said more than 1,000 YC-backed startups are affected by the Silicon Valley Bank collapse. “30% of YC companies exposed through SVB cannot make payroll within the next 30 days,” he tweeted.
The story will be updated as we learn more.