Indian startups sweat as millions of dollars remain stuck in Silicon Valley Bank accounts

Santa Clara, California-headquartered Silicon Valley Bank (SVB), the 16th largest bank in the USA collapsed last week on Friday. The closure of the bank has left the Indian startup ecosystem worried and profusely sweating about their future. 

SVB was one of the largest vendors in the startup ecosystem, providing funding to up-and-coming enterprises. For several years, Indian startups had SVB as their preferred choice of banking, primarily due to the absence of regulatory hassle and flexibility in the payment system. 

Many Indian startups that did not even employ a single person or had an office in the US also opened up accounts in the bank. However, the abrupt closure has left question marks over how the next month’s salaries for the employees or the next round of funding will come for their startup. 

Startup companies related to Y Combinator (YC) are staring at a bleak future. YC is an American tech startup accelerator that has helped launch thousands of startups over the years. 

According to an ET report, at least 40 YC-backed Indian startups have parked between $250,000 to $1 million in SVB ban accounts while over 20 have deposits of more than $1 million. 

The Indian government has smelled the coffee and jumped into action. Union Minister of State for IT Rajeev Chandrasekhar on Sunday said he will be meeting Indian startups later this week to take their pulse and ensure any adverse effect is avoided. 

“The @SVB_Financial closure is certainly disrupting startups across (the) world. Startups are an imp part of #NewIndia Economy. I will meet wth Indian Startups this week to understand impact on thm n how @narendramodi govt can help durng this crisis,” tweeted the minister.

SVB collapsed on Friday after regulators came down charging and seized control of the assets after it failed to meet the withdrawal demands of the investors. 

According to Federal Deposit Insurance Corporation (FDIC), as of December 31, 2022, SVB had total assets amounting to $209 billion and approximately $175.4 billion in total deposits. 

According to reports, FDIC insurance means that any amount up to $250,000 in an SVB account will be fully covered and the startups may get it back. However, for anything above the $250,000 range, the startups or individuals may only get 80 cents to 90 cents for each dollar. 

(With inputs from agencies)

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