Domestic startups welcomed the announcement by the US Treasury, Federal Reserve and Federal Deposit Insurance Corporation (FDIC) that depositors will have access to all of their money starting Monday, March 13, in connection with the Silicon Valley Bank (SVB) collapse. However, they are awaiting clarity on finer details as to how and when the funds will be released.
The announcement did not specify the date or any indicative timeline by when the depositors will be able to access their funds.
The collapse of the bank last week had left many startups, tech companies, entrepreneurs and venture capital funds nervous and jittery, so the latest statement by the US government has given hope to the depositors who have accounts with the bank.
“Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of SVB will be borne by the taxpayer,” a joint statement by secretary of the Treasury, Federal Reserve and FDIC said.
The announcement was welcomed by minister of state (MoS) for IT Rajeev Chandrasekhar, who said that with the US government’s latest action on SVB, the looming risks to Indian startups have passed.
“With this US govt action, looming risks to Indian startups have passed. Learning for Indian startups from this crisis — trust Indian banking system more,” he tweeted.
Nitish Mittersain, founder, CEO and joint MD of Nazara Technologies
“We still don’t have clarity on the timing and if the entire deposits will be available this week, in the next one month or three years,” Mittersain said.
“For smaller startups, the timing becomes more crucial. At Nazara, it really does not matter if the stuck money takes a week or six months, but if a fast enough recourse is not given for the younger companies, it will cause a damage that cannot be repaired. So, those companies are looking to raise some interim bridge round or other capital to meet immediate cash requirements. We also don’t know if any adjustments will be made to the deposited amount,” he added.
This may be the reason for demand being high at Klub and Recur, which are revenue financing platforms. “We know that the situation today is bad, but the situation will get better from here…it will take a few more days until this is resolved. We only rolled out the initiatives over the weekend but have already seen a surge in inbound requests, and are also analysing the applications for next steps,” Anurakt Jain, co-founder and CEO at Klub said. His team was still “expediting applications” to provide capital to the tune of $400,000 within 48 hours.
Apart from salaries, Jain said founders were also tapping Klub for inventory financing as they look to keep their business’ growth going. Similarly, even Recur, which had pooled in about $15 million internally to extend capital to founders had already committed to disbursing over $1 million had said the demand pipeline was strong.
While some concerns linger, large scale worries, which include likely layoffs and a slower pace of growth for startups, have largely been put to rest.