Ribbit Capital, a global venture capital firm that backs firms like PhonePe and Razorpay, has written to its partners explaining their exposure to the Silicon Valley Bank (SVB), which saw an abrupt collapse in the last three days or so.
In a note to partners, also seen by Entrackr, Ribbit said that the VC has more than 60 operating accounts with SVB across Ribbit funds and SPVs in which it currently holds cash deposits totaling approximately $19 million. However, it expects to recover $6.4 million of the amount.
“We expect that approximately $6.4 million of this $19 million will be returned promptly as insured deposits under the FDIC’s insurance program (covering up to $250,000 per account). The FDIC has also indicated that it plans in the near term to provide a special ‘dividend’ to depositors covering a portion of the uninsured amounts while beginning the process of liquidating SVB’s assets to support future distributions,” the VC wrote in the note.
It further disclosed that nearly 90% of the cash in the funds – approximately $219 million – are held in sweep accounts at SVB, but invested in money-market funds managed by Morgan Stanely.
The VC hopes that its holdings will be treated as securities rather than deposits and recovered in full given the structure and legal precedent around these accounts.
On lines of credit, Ribbit said that the lines provided a total of $700 million of liquidity across Ribbit VII, Bullfrog II, Ribbit X, and Ribbit OB1.
“There is approximately $44 million currently drawn (by Bullfrog II). We expect that our access to these facilities is now gone,” the note said.
The VC further said that it is in touch with its portfolio companies. It added that the majority of the portfolio has “little to no exposure” to SVB, and nearly every company has a significant portion of their cash held at other financial institutions.
Impact on Indian startups
The collapse of SVB has sent the startup ecosystem, including India, into a tizzy. Several people have gone on to compare the collapse with the infamous financial crisis in 2008.
SVB, dubbed as the bank for startups since the 1980s, had nearly $175 billion in customer deposits, which is now under the control of the US’ Federal Deposit Insurance Corporation.
More than $250,000 of over 60 Indian startups, backed by YCombinator, is stuck with the now doomed commercial bank, according to a TechCrunch report. Several more Indian startups backed by other prominent Accel, Sequoia India, Lightspeed, and SoftBank, among others may have also been impacted, the report added.
