US-based technology startup accelerator Y Combinator, which has invested in thousands of startups, including at least 200 from India, has written a petition to US Treasury Secretary Janet Yellen and others, asking them to prevent further shockwaves that could lead to financial crisis and layoffs of more than 100,000 workers.
Over 1,200 CEOs and founders representing over 56,000 employees have already signed the petition, written by Garry Tan, CEO and President of Y Combinator, to save startups and hundreds of thousands of jobs.
“We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank,” read the petition.
According to the National Venture Capital Association (NVCA), Silicon Valley Bank has over 37,000 small businesses with more than $250,000 in deposits.
“These balances are now unavailable to them, and without further intervention, according to the FDIC website, may be inaccessible for months to years,” the petition further said.
In the Y Combinator community, one-third of startups with exposure to SVB used SVB as their sole bank account.
“As a result, they will fail to have the cash to run payroll in the next 30 days. By that measure, we can estimate that payroll-related furlough or shutdown will impact more than 10,000 small businesses and startups,” Tan wrote.
If the average small business or startup employs 10 workers, this will have an immediate effect of furlough, layoff, or shutdown, affecting over 100,000 jobs in the most vibrant sector of innovation in our economy, he lamented.
Silicon Valley Bank’s failure has a real risk of systemic contagion. Its collapse has already instilled fear among founders and management teams to look for safer havens for their remaining cash, which can trigger a bank run on every other smaller bank.
He asked regulators that small business depositors at Silicon Valley Bank should be made whole.
“Regulators need to conduct a backstop of depositors. We are not asking for a bank bailout. Congress should work to restore stronger regulatory oversight and capital requirements for regional banks, and any malfeasance or mismanagement on the part of SVB executives leading to this failure should be investigated,” Tan elaborated.
