Startup accelerator organisation, Y Combinator, has said that over 100,000 startup workers risk losing their jobs as a result of the recent collapse of Silicon Valley Bank (SVB).
To avoid this, the organisation is calling on all CEOs and founders to sign a petition addressed to the United States Secretary of the Treasury, Janet Yellen, and other U.S. government officials.
While it is not asking for a bailout for the bank, Y Combinator is among others, asking the government to protect startups whose funds are trapped in the bank to ensure they do not go under.
According to Y Combinator, over 3,500 CEOs and founders representing over 200,000 employees have so far signed the petition in which they are seeking the government’s intervention to save thousands of Startups who are depositors in the collapsed SVB.
The petition: The petition first signed by the CEO & President Y Combinator, Garry Tan, reads:
- “To the Honorable Secretary Janet Yellen, Chairman Martin J. Gruenberg, Chairman Brown, and Chairman McHenry:
- “We, the undersigned, are deeply concerned about the rapid failure of Silicon Valley Bank, a leading financial institution that has played a vital role in supporting the technology industry in the United States. We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy.
- “We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank. According to the 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.
- “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. 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.
- “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.
- “If we allow this to happen, it will immediately impact 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.”
The requests: While emphasising that it is not asking for a bailout for SVB, Y Combinator in the petition made two requests, which are:
- “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.
- “Longer term, 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.”
- “This requires swift and decisive action in order to prevent further shockwaves through the economy that could lead to financial crisis and layoffs of more than 100,000 workers. We must protect US competitiveness in the world,” it added.
Most Y Combinator-backed startups including those in Nigeria banks with the collapsed SVB and their funds are now trapped in the bank. While the Y Combinator petition is seeking relief for American startups who have deposits in the bank, it is unclear yet if the same gesture will be extended to non-American startups that are also impacted by the collapse.
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