Silicon Valley Bank collapse affects many Indian startups

Image credit: Tim Dechant / TechCrunch

The sudden collapse of Silicon Valley Bank, which served as the lifeblood of startups, is also affecting firms 8,000 miles away.

Dozens of young Indian startups backed by the likes of YC, Accel, Sequoia India, Lightspeed, SoftBank and Bessemer Venture Partners banked with Silicon Valley Bank, sometimes as their only banking partner, and could not withdraw the money on time, several people familiar with the situation said so.

VCs are wary of disclosing the names of the affected startups for fear it will affect the young firms’ prospects for raising capital in the future. Regulators stepped in Friday to shut down Silicon Valley Bank, the 16th largest in the U.S. and the bank for most startups.

Some Indian firms could not move their money out of Silicon Valley Bank in time because they did not have another US bank account readily available, many venture capitalists said.

Many Indian startups are incorporated in Delaware to make it easier for them to raise capital from US venture firms like Y Combinator. Some SaaS firms are registered in the US because although they operate from India, they want to serve the international markets and want to be seen as a US firm.

And for many firms that “flipped” their home base to the US from India, Silicon Valley Bank was the preferred choice, another person familiar with the matter said, pointing to the fact that many events in India were sponsored by SVB as the lender’s leaders the push to increase ties with Indian firms.

Almost all Indian SaaS startups with a large presence in the US banked with Silicon Valley Bank, said a partner at one of the top venture funds. Over a dozen Indian SaaS unicorns and many more “sun unicorns” are headquartered in the US

Many of these young firms did not diversify their funds into several banks because, in the early days, it is usually not possible to increase administrative and operational costs.

A US-based investor, who requested anonymity and spoke candidly, said he knew many Indian firms had around $4-10 million parked in their SVB accounts. A group of Indian YC founders polled members about their exposure to SVB and found that more than 60 firms had over $250,000 parked in SVB, according to results seen by TechCrunch.

Indian SaaS startups and otherwise those supported by YC that established their companies in the US and raised their first round there, often had SVB as their default bank, Ashish Dave, India head of Mirae Asset, tweeted. “Uncertainty kills them. Growth is relatively safer as they diversified.”

Garry Tan, the 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 cannot take salary in the next 30 days,” he tweeted.

The story will be updated as we learn more.