The collapse of the Silicon Valley Bank (SVB) – the largest American bank to fail since the 2008 financial crisis – has left billions of dollars belonging to businesses, investors and depositors stranded. Listed among the top 20 US commercial banks last year, the SVB was largely a tech and startup lender. As a result, the fate of several startups led by Indians hangs in the balance now. Many Indian startups like Shaadi, CarWale, Sarva, Loylty Rewardz, TutorVista and Naaptol have raised funds from the beleaguered SVB Financial Group. According to TechCrunch, a US-based online publication that reports on startups, more than 60 YC (Y Combinator)-backed Indian startups have over $250,000 in accounts with the SVB, and nearly two dozen have more than $1 million. YC is an American technology startup accelerator launched in March 2005.
Several venture capitalist firms and Indian startups are unable to withdraw their investments from the bank because they do not have an alternative US bank account. India startups operating out of India are incorporated in the US to serve international markets. The meltdown of the SVB, the first major bank failure in the social media age, has disrupted the global startup sector. In a desperate bid to affirm the stability and credibility of the American banking system, the Joe Biden administration has granted SVB customers access to their money. Soon after its collapse, Silvergate Capital Corporation and Signature Bank, which were major lenders to the crypto sector and tech startups, also followed suit. The developments bring back the memories of the collapse of the 158-year-old Lehman Brothers’ global investment bank in 2008, virtually bringing down the global financial system.