Indian startups have been able to transfer funds worth $250-300 million from Silicon Valley Bank (SVB) after the US allowed depositors to withdraw their cash in full from the crisis-hit bank. According to reports, this transfer of funds happened in the past 24 hours. The average cash balances of early-stage startups in US bank accounts are around $2-3 million, while larger startups have up to $20-25 million lying in their SVB accounts, said several founders and VCs.
For the transfer of funds, Indian firms first need to open new business bank accounts in the US as SVB still hasn’t resumed direct foreign transfers. Reports mentioned that for Indian startups, where a founder has a US social security number, a new bank account in the US can be opened within 24 hours. But for those without a US social security number, it could take up to five days or more to open a US bank account.
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SVB is currently under the receivership of the US Federal Deposit Insurance Corporation (FDIC). On March 13, SVB said that all deposits had been transferred to Deposit Insurance National Bank of Santa Clara (DINB).The FDIC created DINB to help SVB depositors access their funds without delay. Many Indian startups impacted by the SVB crisis are those that received funding from US accelerators like Y Combinator and have adopted a "flip structure" with a US-registered parent entity, typically in Delaware, to attract foreign investors. The use of this structure has become more common among early-stage startups. The act of flipping the holding structure usually entails the transfer of ownership of the company from an Indian entity to a foreign entity, usually in a jurisdiction that is more welcoming to investors.
FAQs:
What is the function of Deposit Insurance National Bank of Santa Clara (DINB)?
A: DINB has been established by the FDIC to enable SVB depositors to immediately access their funds.
Why do Indian startups need to open new business bank accounts in the US?
A: For the transfer of funds, Indian firms need to open new business bank accounts in the US as SVB still hasn’t resumed direct foreign transfers.
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