California-based Silicon Valley Bank (SVB), the 16th largest bank in the United States, was closed on Friday by the California Department of Financial Protection and Innovation which later appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver
Top technology executives, famous venture capitalists including the founder of OpenAI CEO Sam Altman rushed to save start-ups caught up in the collapse of Silicon Valley Bank, news agency Reuters reported. Failure of Silicon Valley Bank, which focused on lending to startups, is the biggest since financial crisis of 2008 and roiled the global markets triggering a selloff in banking stocks across the world.
According to Reuters report, Altman, who runs Silicon Valley's hottest company OpenAI, bailed out some entrepreneurs from his own pocket. "I was running out of options, and so I just emailed him," Doktor Gurson, CEO of Rad AI, said in an interview on Saturday. Within an hour or two, Altman responded, offering him six figures: enough to make payroll and no strings attached, just a request to return the funds once Gurson is able, he said.
"I remember the investors who helped me out when I was running a startup and I really needed it, and I always try to pay it forward," Altman told Reuters. By late Saturday, more than 3,500 CEOs and founders representing some 220,000 workers had signed a petition started by Y Combinator appealing directly to US Treasury Secretary Janet Yellen and others to backstop depositors, many of them small businesses who are at risk of failing to pay staff in the next 30 days.
The petition advocated "stronger regulatory oversight and capital requirements for regional banks" and an investigation into any "malfeasance or mismanagement" by SVB executives. More than 100,000 jobs could be at risk, the petition warned. Meanwhile, the collapse of Silicon Valley Bank, is likely to adversely impact the Indian startup scenario as well as it has injected a lot of uncertainty in the sector overnight, industry experts told PTI. “Hopefully the matter will get resolved, but I think it is a big hit for Indian startups,” Ashu Garg, a prominent Silicon Valley-based venture capitalist and early-stage investor for over two decades, told PTI in an interview.
California-based Silicon Valley Bank (SVB), the 16th largest bank in the United States, was closed on Friday by the California Department of Financial Protection and Innovation which later appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver. The FDIC, in a statement, said as of December 31, 2022, the Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The number of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.
“The reality is that the Silicon Valley Bank has been a real supporter of the Indian startup scene and has provided banking services. Most Indian startups that do business in the US use this bank because it is one of the few institutes willing to work with the Indian banks. A lot of the banking institutes do not want to work with overseas customers,” Garg, an alumnus of IIT Delhi, said.
“So, SVB has been able to work with the Indian companies that do not have US employees. So if they (are gone), it will be very problematic for the Indian (companies),” he said in response to a question. Over the past several years, SVB has been one of the most preferred choices of banking for startups and tech industry in the Silicon Valley, mainly because of its understanding of the industry and flexibility in many aspects suiting the startup ecosystem.
Given that every third startup in the Silicon Valley is founded by Indian-Americans, experts feel a significantly large number of these founders would be impacted as early as next week in terms of even making basic payments and giving paychecks to their employees.