American technology startup accelerator, Y Combinator has penned a letter to the US Treasury Secretary Janet Yellen and others. They were urged to prevent any more shockwaves that could trigger a financial crisis that would in turn result in the layoffs of more than 100,000 employees.
Y Combinator has contributed to thousands of startups, including 200 from India, and has some exposure to troubled banks.
Petition From 1200+ CEOs To Save Jobs
Over 1,200 CEOs and founders representing more than 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.
The petition states, “We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank. These balances are now unavailable to them, and without further intervention, according to the FDIC website, may be inaccessible for months to years.”
According to information from the National Venture Capital Association, Silicon Valley Bank has over 37,000 small businesses with deposits totaling more than $250,000. (NVCA).
According to reports, one-third of startups exposed to SVB in the Y Combinator community used SVB as their only bank account.
More Than 10,000 Small Businesses and Startups To be Impacted
Tan added that within the next 30 days, startups won’t have enough money to pay their employees. By that standard, Tan continued that they can predict that more than 10,000 small businesses and startups will be impacted by payroll-related furloughs or shutdowns.
Tan asserted that if the typical small business or startup employs 10 staff members, this will immediately result in furloughs, layoffs, or shutdowns, affecting over 100,000 jobs in the most dynamic area of innovation in our economy.
The failure of Silicon Valley Bank poses a serious threat of systemic contagion. Its collapse has already caused founders and management teams to flee with their remaining funds in search of safer havens, which could lead to a bank run on every other smaller bank, the petition stated.
He urged regulators to compensate Silicon Valley Bank’s small business depositors.
A backstop of depositors must be conducted by regulators. Congress should work to reinstate stricter regulatory oversight and capital requirements for community banks, and it should look into any misconduct or poor management on the part of SVB executives that contributed to this failure.