The recent collapse of Silicon Valley Bank is not only impacting startups in the US but also young companies in India, according to a report by TechCrunch on Saturday, March 11.
Many of these startups were backed by prominent investors like YC, Accel, Sequoia India, Lightspeed, SoftBank, and Bessemer Venture Partners, and relied solely on Silicon Valley Bank as their banking partner.
Unfortunately, these startups have been unable to access their funds in a timely manner due to the sudden shutdown of the bank.
SVP Collapse Impacts Indian Startups
While venture capitalists are aware of the affected Indian startups, they are cautious about revealing their names as they fear it may hinder their prospects of gaining capital in the future, as per TechCrunch's report.
The shutdown of Silicon Valley Bank, which was the bank of choice for most startups, was due to regulatory action.
A major issue faced by Indian startups was the inability to quickly transfer their funds from Silicon Valley Bank because they did not have another US banking account.
TechCrunch notes that many startups are incorporated in Delaware, as this makes it easier for them to raise capital from US venture firms like Y Combinator.
In addition, some SaaS firms are registered in the US, as they operate from India and want to serve international markets, while still being seen as US-based companies.
For many firms that relocated their base from India to the US, Silicon Valley Bank was the preferred choice of banking partner. Many events sponsored by SVB contributed to its popularity among these startups.
Indian SaaS Unicorns and Soonicorns
A partner at a top venture fund told TechCrunch that almost all Indian SaaS startups with a large presence in the US banked with Silicon Valley Bank. Over a dozen Indian SaaS unicorns and many more "soonicorns" are headquartered in the US.
The collapse of Silicon Valley Bank has left Indian startups in a difficult position, as many were solely reliant on the bank for their financial operations.
The inability to access their funds in a timely manner has caused a major setback for many of these young companies. It is unclear how long it will take for the startups to recover from the impact of the bank's shutdown, and whether they will be able to find a new banking partner that meets their needs.
TechCrunch reported that many of the Indian startups affected by the collapse of Silicon Valley Bank did not diversify their funds into multiple banks, as it was not feasible for them to increase administrative and operating costs.
An anonymous US-based investor claimed that many Indian firms had $4-10 million parked in their SVB accounts, while a group of Indian Y Combinator founders polled members and found that more than 60 companies had over $250,000 parked in SVB.
According to Garry Tan, the president of Y Combinator, more than 1,000 YC-backed startups are impacted by the bank's collapse, with 30% of those exposed through SVB unable to make payroll in the next 30 days.
