serial entrepreneur and Venture capitalist Garry Tan is less than three months into his new job as CEO of Y Combinator, one of the most famous accelerator programs in technology. And it looks like it’s been an eventful onboarding process so far. Along with almost every other corner of the startup world, YC was also affected by the collapse of Silicon Valley Bank: 30% of companies are exposed through SVBs and risk not being able to pay payroll, he tweeted on saturday.
The investor called on Congress to act more decisively to save SVB after it was taken over by regulators on Friday. Tan wrote a petition to Secretary Janet Yellen, President Martin J. Gruenberg, President Sherrod Brown, and President Patrick McHenry asking for “relief and attention to the immediate critical impact on small businesses, startups, and their employees who are depositors in the bank”. The petition is signed by more than 600 CEOs and founders of companies including Alloy Automation, Atoms, Flutterwave and Brex, whose CEO is currently trying to raise $1 billion over the weekend for emergency loans.
“We are not asking for a bailout for the bank’s shareholders or its management; We ask you to save innovation in the American economy,” the petition reads.
The memo calls for two things: that small business depositors at SVB be recouped via regulators backstopping, and that Congress restore “stronger regulatory oversight and capital requirements for regional banks, and any embezzlement or mismanagement by SVB executives”. What led to this failure must be investigated.” YC asks people to fill out a Google form “if you would like to join us in imploring the US government to take action that will help stop the layoffs of more than 100,000 employees, prevent a future financial crisis, and protect the competitiveness of USA in the world. ”
The rapidly developing situation at SVB has caught many off guard, but from the outset, Tan told YC companies that “whenever you hear about solvency problems at a bank, and it can be considered credible, you should take it seriously and prioritize interest from his startup by exposing himself to no more than $250,000 of exposure this year,” according to an internal screenshot seen by TechCrunch.
Twenty four hours after he said that, Tan took to Twitter to say that. “This is an extinction level event for startups and will set startups and innovation back 10 years or more. BIG TECH will not worry about this. They have cash elsewhere. All the small start-ups, Google and Facebook of tomorrow, will die out if we don’t find a solution.”
Based on Tan’s memo from Saturday, it appears he is taking the first steps toward finding that solution.
Update: On Sunday, Treasury Secretary Janet Yellen said the US government would not bail out Silicon Valley Bank, but is concerned about depositors, TechCrunch’s Manish Singh reports.