The disappearance of a supportive financial institution, which may have given them their first business credit card or mortgage, hits a bit different for foreign-born entrepreneurs.
“Being an immigrant, it was much easier to open a Silicon Valley Bank account than a non-Silicon Valley Bank account,” said one founder.
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The 3.2 million foreign-born entrepreneurs operating businesses in the U.S. are key drivers of innovation, with immigrants most famously starting Silicon Valley heavyweights such as Google, Tesla and Yahoo. That’s even as foreign-born founders have had to work harder to overcome obstacles that include the thorny mess that’s U.S. immigration policy.
The failure of Silicon Valley Bank, now operating under FDIC receivership, will be one more obstacle many of them will have to overcome.
“Immigrant founders have a harder time raising capital and whenever there are events like this, it only makes things harder,” Payam Pourtaheri, an Iranian immigrant who is cofounder and CEO of Agrospheres, tells Forbes by email.
Some immigrant founders of venture-backed companies, especially those who arrived years ago or have become American citizens, said there was unlikely to be much change for them. Others, many of whom came to the U.S. more recently or have struggled to raise funds or break through because of discrimination, felt that the loss of the startup community’s bank was likely to be one more roadblock to get around at a time of economic uncertainty.
Santa Clara, California-based Silicon Valley Bank, which had $189 billion in deposits at the end of 2021, was known for its founder-friendly policies, many of them especially helpful for immigrants. It accepted customers without Social Security numbers, provided first mortgages to entrepreneurs who might not meet a larger bank’s traditional criteria and helped early-stage founders get business credit cards that weren’t tied to their personal credit. Those practices made it the bank of choice for many founders — it serviced nearly half of all U.S. venture-backed startups — and popular among immigrant founders.
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“SVB took chances on founders in a way that no traditional banking institution would do.”
“For every immigrant founder I know, among the Indian and Chinese community in Seattle, it was their first bank,” says Xiao Wang, cofounder and CEO of Boundless Immigration, a startup that uses software to cut the costs of doing immigration paperwork for visas and green cards. “SVB took chances on founders in a way that no traditional banking institution would do.”
One early-stage founder from India, who came here on an O-1 visa for those with extraordinary ability, recalls struggling to get a business account with a major bank because it required Social Security numbers for all the company’s directors. Silicon Valley Bank didn’t have that requirement, didn’t require a minimum balance and was able to set up an account quickly. “Being an immigrant, it was much easier to open a Silicon Valley Bank account than a non-Silicon Valley Bank account,” he says.
It’s not just immigrants who will feel the impact the hardest. Founders who are younger or those who historically have less access to capital, including women and Black entrepreneurs, are also likely to be affected. A recent survey by Crunchbase found that VC dollars to Black startup founders fell more than 50% last year, a disproportionate hit at a time when overall funding dropped around one-third.
“As much as immigrants have these disadvantages about not having a credit history, if you look at a cross-section of the population, a lot of people are underbanked,” says Igor Ostrovsky, founder of fintech Koverly. Ostrovsky, who came to the U.S. from Ukraine when he was 12, sees the bigger issue as how traditional banks deal with potential customers who don’t fit the box. “As long as your business model is a little different, the answer is a very quick ‘no,’” he says. “There’s no ‘Let’s talk through your business model and understand how we can help you.’ It’s just, ‘We’re not interested in your business.’”
Courtesy Snigdha Sur
“That’s a daily occurrence for immigrants, for female founders, for founders of color. … The bias happens in the earliest stages and then that bias compounds.”
Still, because immigrants create so many companies, any fallout on them would have a disproportionate impact on the innovation economy. “Immigration has been the lifeblood of our economy,” says Jeff Housenbold, former CEO of Shutterfly and venture capitalist at SoftBank who now runs his own investment firm Honor Ventures. “We’ve made that difficult with immigration [policy] and with things like SVB not being there anymore. You don’t feel that as a society overnight, but we’re not going to get those Horatio Algers of the world. It will be harder, not impossible, for them to come and get started.”
Sunil Singh, who came to Silicon Valley from India two decades ago and is now on his eighth startup with fintech infrastructure company Tallied, says that Silicon Valley Bank played an especially important role among immigrant founders who lacked savings or home equity, and who were in the U.S. on one of the alphabet soup of visas. “Immigrants are still in the building stage so the options for them are more limited,” Singh says. “I have so many founder friends where this was their first account when they were bootstrapping.”
Snigdha Sur, an Indian immigrant with an MBA from Harvard who used to work at McKinsey, recalls how she raised $800,000 after taking her South Asian media company, The Juggernaut, through Y Combinator, while white, male cohorts from her class at YC were raising millions. “We’re used to the rug being pulled out from under us,” she says. “That’s a daily occurrence for immigrants, for female founders, for founders of color. … The bias happens in the earliest stages and then that bias compounds.”
While Sur didn’t have any funds with SVB, she wonders what the fallout of its collapse will be for founders like herself. She points especially to the question of what will happen with venture debt, where SVB allowed founders to get additional cash for operations without the dilution of raising more equity. “What I’m fearful of is if we cannot come out with more products for women and immigrants, that could really harm us,” she says. “But because we run more cash-frugal businesses, we can make those runways last a long time.”
Courtesy Rajat Bhageria
“A shoe has dropped, and this has happened. There’s a lot of fear right now.”
Boundless’s Wang says that when he was starting out he was able to get a credit card from SVB that was tied to his business, while other banks where he’d applied told him they would only give him one tied to his personal credit. That would’ve meant a far greater limit on the funds he could access. For some founders with even less financial history, such a policy could mean a complete lack of credit. “That’s a scary situation when you’re trying to pay for your first set of SaaS subscriptions and apps,” he says.
Changes in access to capital combined with the complexity of visas could put added pressure on immigrant-founded startups. “If you look at immigrant founders, there’s a lot more uncertainty versus someone who has stayed in this country,” says Himanshu Shukla, founder and CEO of LightBeam.ai. While Shukla, an Indian immigrant, is a citizen now, he says that he might feel more anxiety about running a startup if he were still on a visa. “If I look at when I was on an H-1B visa, I would be very worried about joining a startup, although I’ve joined startups all throughout my career,” he says.
In some ways, the collapse of Silicon Valley Bank has simply exposed broader cracks in the venture-backed startup world at a time when the economy is already precarious and the easy money days of the past decade are over. Rajat Bhageria, founder and CEO of Chef Robotics, says that while the immediate cash crisis of Silicon Valley Bank is over, he’s already cut back his plans for the year to focus on costs. While that’s not specific to being an immigrant, any cuts could have a disproportionate impact on immigrants, who rely on H-1B visas tied to their jobs to stay in the country.
Visa status can also make starting a company even more risky. Bhageria, who came to the U.S. from India with his parents when he was young and is a naturalized U.S. citizen, points to a young foreign-born worker on his staff who had hoped to start a business and in the wake of SVB’s collapse sees that as too risky. “There’s a general fear in the market that something might happen,” Bhageria says. “A shoe has dropped, and this has happened. There’s a lot of fear right now.”
