“In the case of India, the number of Indian startups [impacted] definitely very high compared to other countries except the US, but the capital will not be that big,” says Smriti Tomar, founder and CEO of Stack, a Y Combinator-backed startup that had some funding in SVB. “From this, we can safely assume that most startups have somewhere between $250,000 and $1.5 million in exposure—this was the category where most startups believe they have their money locked up.”
Hundreds of WhatsApp groups, communities and support forums have sprung up over the weekend since SVB went down to help people figure out how to respond.
Many of them are clients of Krishna’s startup Inkle, which offers an accounting and tax product to companies incorporated in the US with an Indian subsidiary. Krishna says that on Thursday, March 9, most of his customers weren’t worried about their funds, but by Friday, everyone started taking it more seriously. The biggest problem, he said, was that many of these founders did not have secondary bank accounts and instead relied heavily on SVB. Since then, the founders have had to open dollar accounts at several banks in GIFT City—India’s answer to Delaware—in Gujarat, which provides offshore accounts to non-residents and offshore entities. This means that once they can access the funds in their SVB accounts, they will have an account to transfer them to.
Many startups were afraid for their business. Krishna says that one of his clients, all of whose funds were in SVB, told him that he would run out of money in his account in India within weeks, and that unless the US bailed out the bank, he would have to close and lay off his staff from 100 people. “The founders were very, very concerned about this,” Krishna says.
Tomar says she, along with the other founders, began looking for ways to cut back in order to survive. “It was not a very good situation [in]. We were about to hit the extreme cost-cutting button,” she says.
Now she is waiting to see what happens next. The U.S. government said SVB depositors in the U.S. will have their deposits protected and will be able to access their funds again, although it is unclear when international wire transfers will resume.
However, the collapse of the bank means that many startups in India are rethinking how they calculate their exposure and will have to diversify their banking relationships in the US and India because almost no one expected it.
“I’ve worked in Silicon Valley for 23 years and I’ve seen the ups and downs and the economic downturns, but for a bank this big and influential to close in two days, with no predecessor, no signs of faltering, it’s unprecedented. ” said Anil Advani, founder and managing partner of Inventus law, a global technology law firm that also had money in SVB. “No one, including [the] the highest management of the SVB, had no idea. In fact, some of my friends told me [because] shares went down, they were looking to buy more shares only on Wednesday last week.”
