The sudden collapse of Silicon Valley Bank, which served as a lifeblood for startups, is also affecting companies 8,000 miles away.
Dozens of young Indian companies backed by YC, Accel, Sequoia India, Lightspeed, SoftBank and Bessemer Venture Partners banked with Silicon Valley Bank, sometimes as their sole banking partner, and were unable to get the money out on time, several people familiar with. the situation, he said.
Venture capitalists are wary of disclosing the names of affected startups for fear it will affect the young companies’ prospects of raising capital in the future. Regulators stepped in on Friday to shut down Silicon Valley Bank, the 16th largest in the US and the bank for most startups.
Some Indian firms were unable to move their funds from Silicon Valley Bank in time because they did not have another available US bank account, many venture capitalists said.
Many Indian startups incorporate in Delaware to make it easier for them to raise capital from American venture firms like Y Combinator. Some SaaS companies are registered in the US because even though they operate from India, they want to serve international markets and want to be seen as a US company.
And for many companies that “shifted” their base of operations from India to the US, Silicon Valley Bank was the preferred choice, another person familiar with the matter said, pointing to many SVB-sponsored events.
Almost all Indian SaaS startups with large US presences count on Silicon Valley Bank, said a partner at one of the major venture funds. More than a dozen Indian SaaS unicorns and many more “soonicorns” are based in the US.
Many of these young companies did not diversify their funds across multiple banks because, in the early days, increasing administrative and operating costs is generally not feasible.
One US-based investor, who requested anonymity speaking candidly, said he knew for a fact 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 otherwise YC-backed ones setting up their businesses in the US and raising their first round there often had SVB as their default bank, Ashish Dave, head of Mirae Asset at India, tweeted. “Uncertainty is killing them. Growth ones are relatively safer as they diversify.”
Garry Tan, president of Y Combinator, said that more than 1,000 YC-backed startups are affected by the collapse of Silicon Valley Bank. “30% of YC companies exposed through SVB are unable to pay payroll in the next 30 days,” he tweeted.
The story will be updated as we learn more.
