Possible layoff of over 100,000 and impact on 10,000 startups due to Silicon Valley Bank
- ByStartupStory | March 13, 2023
Y Combinator submitted a petition to the US government on Sunday, expressing concern that around 10,000 small businesses may not be able to pay their employees in the next 30 days due to the collapse of Silicon Valley Bank. The petition, addressed to US Secretary of the Treasury Janet Yellen, noted that approximately 100,000 jobs could be impacted as a result. It further stated that one-third of the startups in Y Combinator’s community rely solely on Silicon Valley Bank for their accounts.
According to a petition submitted by Y Combinator to the US government on Sunday, the collapse of Silicon Valley Bank could potentially impact around 10,000 small businesses and startups, leading to payroll-related furlough or shutdown. This could affect over 100,000 jobs in the innovation sector of the economy, assuming that an average small business employs 10 workers. The petition also stated that more than 3,500 co-founders, CEOs, and over 2 lakh employees of startups and small businesses, including Indian companies PayO, SaveIN, and SalaryBook, have supported the petition.
The National Venture Capital Association (NVCA) has reported that Silicon Valley Bank has over 37,000 small businesses with over USD 250,000 in deposits, which are now unavailable to them. The petition submitted to the US government warns that if further intervention is not taken, these deposits may be inaccessible for months to years. The petition states that allowing this to happen will have an immediate impact on the US technology industry and US competitiveness worldwide and ultimately set back US competitiveness by a decade or more, while the rest of the world races forward.
As per data provided by the National Venture Capital Association (NVCA), Silicon Valley Bank has around 37,000 small businesses that have deposited over $250,000, which are currently inaccessible to them. The FDIC website warns that these funds may remain inaccessible for months to years without further intervention, according to the petition.
According to the petition, the collapse of Silicon Valley Bank poses a significant risk of systemic contagion and has created fear among founders and management teams, potentially triggering a bank run on smaller banks. YCombinator’s President and CEO Garry Tan had earlier noted that the real victims of the SVB fallout were smaller startups that might be forced to shut down or furlough next week. The CEO said that this incident would set startups and innovation back by 10 years.AcuityAds Holdings Inc. faced a significant setback due to SVB Financial Group’s insolvency, with the Canadian advertising-tech company having $55 million in deposits at SVB and a mere $4.8 million in other banks, as per the statement.
While deposits up to USD 250,000 are federally insured, anything exceeding this amount is considered uninsured. However, the Federal Deposit Insurance Corporation has stated that insured deposits will be accessible starting Monday.
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