The collapse of the Silicon Valley bank affects many Indian startups

Image credits: Tim DeChant/TechCrunch

The sudden collapse of Silicon Valley Bank, which had been a lifeline for start-ups, is also affecting 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 have dealt with the Silicon Valley bank, sometimes as its sole banking partner, and have not been able to take the money on time, several people familiar with the situation said.

Venture capitalists are cautious about disclosing the names of affected startups for fear that this could affect the startups’ prospects for raising capital in the future. Regulators stepped in on Friday to shut down the Silicon Valley bank, the 16th-largest bank in the US and the largest bank for startups.

Some Indian companies could not move their money in time from the Silicon Valley bank because they did not have another US bank account readily available, several venture capitalists recounted.

Many Indian startups have been incorporated in Delaware to facilitate the raising of capital from American companies such as Y Combinator. Some SaaS companies are registered in the US because even while they operate from India, they want to serve international markets and they want to be seen as an American company.

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

Almost all Indian SaaS startups with a significant presence in the US have dealt with Silicon Valley Bank, a partner in one of the largest venture capital funds. Over a dozen Indian SaaS companies and many other “soonicorns” are headquartered in the US

Many of these young companies have not diversified their funds into multiple banks because in the early days it is usually not feasible to increase management and operating costs.

A US-based investor, who asked to remain anonymous, said he knows for a fact that many Indian companies have between $4 million and $10 million parked in their SVB accounts. A group of Indian YC founders surveyed members about their SVB exposure and found that more than 60 companies have more than $250,000 parked in SVB, according to results seen by TechCrunch.

Indian SaaS startups and other YC-backed companies that set up their companies in the US and raised their first round there often had an SVB as their virtual bank, Ashish Dave, head of Mirae Asset in India, chirp. “The obscurity kills them. It is relatively safer to grow because of their diversity.”

Gary Tan, president of Y Combinator, said more than 1,000 YC-backed startups were affected by the Silicon Valley bank collapse. “30% of YC companies exposed through SVB cannot submit payroll in the next 30 days,” he tweeted.

The story will be updated as we learn more.