The recent financial crisis of Silicon Valley Bank has impacted companies within the US and companies that are young in India, According to the report from TechCrunch on the 11th of March on a Saturday.
Many of these startups were supported by prominent investors, such as YC, Accel, Sequoia India, Lightspeed, SoftBank, and Bessemer Venture Partners. They depended upon Silicon Valley Bank as their bank partner.
However, these businesses can’t get their money on time because of the sudden closure by the institution.
SVP Collapse Hurts Indian Startups
Although venture capitalists know of adverse effects on Indian startups, they’re beware of sharing their names since they fear it could hamper their chances of getting capital shortly, according to TechCrunch’s research.
Silicon Valley Bank, the preferred bank for many startups, was closed due to regulation-related actions.
The biggest issue for Indian startups was the inability to swiftly transfer their money to Silicon Valley Bank because they didn’t have a US bank account.
TechCrunch mentions that many startups are in Delaware, allowing companies to obtain funds from US venture capitalists such as Y Combinator.
Additionally, some SaaS companies can be registered within the US because they are based in India and looking to reach international markets but are considered US-based businesses.
Silicon Valley Bank was the most popular choice for a bank partner for many companies who relocated their headquarters in India, America US. Numerous events organized by SVB have contributed to its success in the startup world.
Indian SaaS Unicorns, as well as Soonicorns
A partner from a top venture fund has told TechCrunch that the majority of Indian SaaS companies that have a substantial footprint in the US have a bank account with Silicon Valley Bank. More than 12 Indian SaaS unicorns and many more “unicorns” have headquarters in the US.
The fall of Silicon Valley Bank has left Indian startup companies in a challenging situation since they largely depended on the bank to fund their operations in the financial sector.
Accessing funds on time has resulted in a significant setback for many of these new companies. It’s still being determined what time frame it will take the businesses to recover from the consequences of the bank’s closure and if they’ll be able to find the right bank partner that can meet their requirements.
TechCrunch revealed that a lot of the Indian companies that were affected by the demise of Silicon Valley Bank did not diversify their money into different banks because it was inconvenient for them to raise the administrative and operational costs.
A US-based investor has said that many Indian companies had between $4 and $10 million stashed inside their SVB accounts. A team consisting of Indian Y Combinator founders polled members and discovered that more than 60 businesses were able to park more than $250,000 in SVB.
As per Garry Tan, the president of Y Combinator, more than 1,000 startups backed by YC are affected by the bank’s failure, and most of those impacted by SVB is in a position not to pay the bills in the next 30 working days.