Nearly two-dozen YC-backed Indian startups have more than $1 million stuck in accounts at Silicon Valley Bank and more than four dozen more have more than $250,000 tied up in the lender, according to chats and results of a survey of startups seen by TechCrunch, describes how the sudden collapse of the bank headquarters in Californiawhich served as lifeblood for startupsalso affects companies 8,000 miles away.
Dozens of young Indian startups backed by the likes of YC, Accel, Sequoia India, Lightspeed, SoftBank and Bessemer Venture Partners bankrolled Silicon Valley Bank, sometimes as their banking partner, and couldn’t release money on time on Thursday, multiple people familiar with the situation said.
VCs are wary about revealing the names of affected startups for fear it could affect the young companies’ prospects for 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 companies could not transfer their funds from Silicon Valley Bank in time because they did not have another US banking account readily available, several venture capitalists said.
Many Indian startups are incorporated in Delaware to make it easier for them to raise capital from US venture firms such as 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-firm.
Moreover, many companies have “flipped” their home base to the US from India, Silicon Valley Bank being the preferred choice, said another person familiar with the matter, pointing to the fact that many events in India were sponsored by SVB as lender executives. pushed to increase ties with Indian companies.
Almost all Indian SaaS startups with a large presence in the US are bankrolled at Silicon Valley Bank, a partner at one of the top venture funds said. More than a dozen Indian SaaS unicorns and many more “soonicorns” are headquartered in the US
Many of these young companies do not diversify their funds among many banks because in the early days of a company, operators tend to avoid increasing admin costs. A US-based investor, who requested anonymity to speak candidly, said he knows for a fact that many Indian companies have around $4-10 million parked in their SVB accounts.
Indian SaaS startups and otherwise YC-backed ones that have built their companies in the US and raised their first round there often have SVB as their default bank, Ashish Dave, India head of Mirae Asset , tweeted. “Uncertainty kills them. Growths are relatively safer as they diversify.”
Garry Tan, the president of Y Combinator, said that more than 1,000 YC-backed startups were affected by the collapse of Silicon Valley Bank. “30% of YC companies exposed through SVB cannot make payroll in the next 30 days,” he tweeted.
The story will be updated as we learn more.