Y Combinator sends petition to US government; seeks relief, attention over SVB crisis

The petition, written by Y Combinator president Garry Tan, has been signed by over 3,500 CEOs and founders. The signatories also include almost two dozen startups with a base in India.

In the petition, Tan urged the US government that small business depositors at SVB should be made whole, and regulators should conduct a backstop of depositors.

According to a Bloomberg report, the US Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) are considering creation of a new fund to allow regulators to backstop more deposits at banks that run into trouble following SVB’s collapse.

“We are not asking for a bank bailout,” Tan wrote in the petition. “We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank”.

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“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,” he pointed out, adding that 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.

ET reported Saturday that at least 60 Y Combinator-backed startups in India had more than $250,000 each in their bank accounts with SVB. Investors have been advising their impacted portfolio startups to immediately open new bank accounts and divert customer payments to these alternate accounts to maintain a cash flow.

“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,” Tan wrote.

The petition also urged the US Congress to work on restoring stronger regulatory oversight and capital requirements for regional banks, and that “any malfeasance or mismanagement on the part of SVB executives leading to this failure should be investigated”.