The closure of Silicon Valley Bank (SVB) has affected thousands of venture capital firms, half of them backed by U.S. capital. The bank was also popular with Indian startup founders because it allowed them to open accounts remotely and did not require them to have a social security number (SSN). Many founders have had to withdraw their money or risk not being able to pay payroll or suppliers. The failure of the Californian bank has led to a massive withdrawal of deposits, creating a domino effect that has reverberated throughout the Indian technology sector.
The founder and CEO of human resources technology company ishield.ai, Kesavan Kanchi Kandadai, was one of those affected and says he received a call from a friend at 3 a.m. on Friday, March 10. Within hours, Kandadai rushed to arrange bank transfers, as 100 percent of his company’s funds were deposited in SVB which was sinking that was sinking. “It’s a problem that no startup founder can foresee,” says Kandadai. “It’s like a black swan.”
Many software-as-a-service companies in India serve U.S. customers and are backed by U.S. venture capital, The rapid growth of the Indian technology sector has attracted billions of dollars of U.S. venture capital funding over the past decade and has brought many Indian companies into incubator programs such as Y Combinator.
It is unknown how many Indian founders have opened a bank account at SVB, but it is likely in the hundreds and the affected companies had deposits of more than $250,000 each trapped at the bank. Among the listed Indian tech companies, gaming company Nazara Tech informed the exchanges that it has $7.75 million, about 11% of its cash, trapped at SVB.
The SVB bankruptcy has been a global catastrophe and has left many jobs at risk. “A lot of startups in India are still remote and those jobs were at serious risk because people were running out of them,” says Anand Krishna, founder of financial technology startup Inkle.