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<ul><li>Startups from across sectors – ecommerce, digital payments etc., continue to burn cash even though some of them have also raised funds this year. </li><li>Amazon, Flipkart, <keyword id="6357120" type="DEFINITION" weightage="20" keywordseo="paytm">Paytm</keyword> have all reported losses for the financial year ending March 2019.</li></ul>The financial reports of most Indian unicorns and startups show that even while they are growing at a fast pace, the numbers are not on their side. Startups across sectors – ecommerce, digital payments etc., continue to burn cash even though some of them have also raised funds this year. Here’s a roundup of startup losses that have been reported so far <div type="Slideshow" msid="71851673" hostid="261" title="2019 roundup so far: Startups are growing bigger but by widening losses" firstImageMsid="71851674" slideCount="7"></div>

2019 roundup so far: Startups are growing bigger but by widening losses

Every new business will lose fresh <keyword id="6354840" type="PERSON" weightage="60" keywordseo="money">money</keyword>. This has to be taken as a ‘given.’ Making a planned loss is never a problem. Making an unplanned loss and then having to try and justify it is a huge problem. 
 Most <keyword id="6359301" type="POSITION" weightage="80" keywordseo="Entrepreneur">entrepreneur</keyword>s tend to look only at the rosy and the optimistic picture, without recognising the problems that will be faced and without factoring in a number of unplanned costs that will be incurred. In spite of the company growing in high double digits, an entrepreneur is always on the backfoot with the board of directors because he/she has not met the overaggressive business plans. No amount of growth over the past year is relevant if one has not met the budgets. This will always frustrate the management team of a company at most board reviews. 
 
It is important for every entrepreneur to understand that making money is not going to be easy. Don’t believe for a second that revenues will instantly start coming in and customers will start flocking around to buy your products. The reality is totally different, and you will fare much better if you understand that and plan for it beforehand, rather than get surprised later. 
 
It is better to plan for losses and state that in your business plan. When monthly reviews are held with the board of directors, it is always better to explain how you have over-achieved your numbers instead of taking high targets initially and explaining negative variances each month. 
 
Always remember that it is easier to ‘under-promise and over-deliver’ rather than ‘over-promise and under-deliver.’ The wise thing to do is build a ‘stretch’ in the business plan, which will give you the cushion you need to handle any contingency. 
 
No one likes to lose money and yet, it is a well-recognised fact that most new businesses will lose money. Some businesses will lose money for longer periods than others because of the nature of the business, and retail businesses have very long gestation periods. Don’t feel ashamed if your business is losing money, as long as you can see the light at the end of tunnel. 
 
All businesses will burn money and it is necessary to have sufficient funds in the bank to meet the burn. Most entrepreneurs and start-ups should plan for their losses and understand what the monthly burn is likely to be – so that at no stage the business will run out of funds. 
 ‘<keyword id="37885" type="ORGANIZATION" weightage="60" keywordseo="Cash">Cash</keyword> burn’ should be defined as the amount of money that is committed to be spent each month, irrespective of whether or not a business is generating any cash flow. This is also the amount that is required to be put in every month to meet the cash losses of the company. These expenses are for basic necessities such as salaries, rentals, utilities and communication costs, as well as for requirements of a capital nature such as store build-out and fixed assets. 
 
All businesses will be confronted with several unplanned costs, which will throw the entire cash planning out of gear. That is when the entrepreneur will have to scramble to raise additional funds. 
 
The author is the chairman of Guardian Pharmacies and the author of the bestselling books, The Corner Office and The Buck Stops Here. Twitter: @gargashutosh

Startup Losses And
Cash Burn. What’s The Difference?

<a href="http://www.businessinsider.in/searchresult.cms?query=Indian+startups">Indian startups</a> have never seen better days. While some analysts argue the <a href="http://www.businessinsider.in/searchresult.cms?query=Indian+startups">startup</a> bubble has burst with <a href="http://www.businessinsider.in/searchresult.cms?query=TinyOwl">TinyOwl</a> and <a href="http://www.businessinsider.in/searchresult.cms?query=Zomato">Zomato</a>, the truth is the country has attracted investors by the truckloads until very recently. Some of the world’s leading investors, the likes of <a href="http://www.businessinsider.in/searchresult.cms?query=Tiger+Global">Tiger Global</a> are increasingly interested in investing their billions into this ‘untapped’ economy. 
 
China is targeting a minimum growth rate of 6.5% per year until 2020. That’s the lowest it has seen since the late 1970s. 
 
A recent analysis by <a href="http://qz.com/538962/indian-startups-have-been-handed-an-incredible-opportunity-to-reach-new-investors/">Quartz</a> proves just that - India has been awarded an awesome opportunity. 
 
 
It would take a lot to close the gap between China and India. The former still takes the largest share of the VC money coming into Asia. However, the influx of Chinese e-commerce giant <a href="http://www.businessinsider.in/searchresult.cms?query=Alibaba">Alibaba</a>, Japan's <a href="http://www.businessinsider.in/searchresult.cms?query=SoftBank">SoftBank</a>, and <a href="http://www.businessinsider.in/searchresult.cms?query=Google+Capital">Google Capital</a> promises to give the Chinese a tough run for their money. 
 
 
However, the key point here is ‘long term’. With China’s economy showing signs of stagnancy, the trillion dollar question is if investors would turn their attention toward India in the long run. 
 
 
Mind, old habits die hard. <a href="http://www.businessinsider.in/searchresult.cms?query=Indian+startups">Indian startups</a> surely need to dangle big carrots to keep investors hooked for long enough to gain preference over the Big Daddy of the Asian economy. 
 
Image credit: Indiatimes and <a href="http://qz.com/538962/indian-startups-have-been-handed-an-incredible-opportunity-to-reach-new-investors/">Quartz</a>

China’s loss maybe gain for Indian
Startups

Smaller firms are keeping a hawk’s eye on layoffs in bigger players. The <keyword id="44572" type="UNKNOWN" weightage="20" keywordseo="cost-cutting">cost cutting</keyword> and layoffs in bigger tech startups are working in favour of smaller ones. 
 
Executives at senior levels, who are forced to exit bigger companies, are being hired by fresh startups. 
 
"Once we got to know that a Mumbai-based company would be resizing their staff, we parked four of our tech architects and the HR (human resource) at Mumbai for two days for back-to-back interviews. That was very fruitful as we will be onboarding a senior product lead and an analytics person soon," Manish Chopra, co-founder of deal discovery firm Little, told ET. 
 
With this move, smaller firms get experts in their team and can focus more on moving ahead, instead of trial and error. 
 
"On an average, each founder I have spoken to has recommended three to four employees. It is the humane thing to do when the company is unable to raise funds or is looking to resize its employee base," Pranav Goel, co-founder at mini-truck aggregator The Porter, told ET. 
 
When talking about salaries, small startups have higher packages as well and also give stock options. 
 
(Image: Thinkstock)

Someone’s loss is someone’s gain. These startups are proving so

<div class="KonaFilter image-container display-table"><div><div class="image"></div></div></div><ul class="summary-list"><li>Several once-promising startups backed by <a href="https://www.businessinsider.com/category/softbank">SoftBank's</a> Vision Fund stumbled this week. </li><li>High-profile executives from at least three SoftBank-backed startups this week have indicated they were leaving their companies, including Wag CEO Hilary Schneider and <a href="https://www.businessinsider.com/zume-cmo-mark-crumpacker-executive-departures-softbank-startup-2019-11">four senior executives from Zume</a>. </li><li>Oyo, an India-based hotel startup also announced a six-fold rise in losses, and predicted that the company would only make a profit beginning in 2022, <a href="https://www.reuters.com/article/us-oyo-results/softbanks-oyo-projects-losses-in-india-china-until-2022-valuation-report-idUSKBN1XZ1JT">according to Reuters</a>. </li><li>These stumbles are reflective of the troubles that SoftBank-backed startups have been facing, as the string of WeWork scandals has drawn closer scrutiny to SoftBank's other investments. </li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories.</a></li></ul>Masayoshi Son, the CEO and founder of SoftBank, has became a household name in Silicon Valley for his company's Vision Fund - a venture firm with a strategy of pouring hundreds of millions (and sometimes billions) of dollars into startups, in an attempt to pick the next class of big winners.But this past year, things took a turn for the worse among for SoftBank-backed companies. Uber and Slack stumbled out of the gate in their public-market debuts. Most infamously, WeWork's planned IPO process imploded, and SoftBank stepped in with $9.5 billion <a href="https://www.businessinsider.com/softbank-agrees-to-rescue-wework-in-a-bailout-deal-2019-10?r=US&amp;IR=T?utm_source=markets&amp;utm_medium=ingest">to bail out the buzzy office-rental company in a takeover deal</a>.The market has begun to <a href="https://markets.businessinsider.com/news/stocks/best-ipos-of-2019-performance-every-1-billion-plus-offering-2019-10-1028577600">sour</a> on high-risk loss-making companies. For its part, in November, SoftBank <a href="https://www.businessinsider.com/softbank-reports-65-billion-loss-uber-wework-investments-bailouts-2019-11">reported its first quarterly operating loss</a> in 14 years. SoftBank's Vision Fund reported its own $9 billion loss for the quarter. Investors are now beginning to question SoftBank's corporate governance and its investment strategies, according to <a href="https://www.wsj.com/articles/softbank-shareholders-criticize-company-after-wework-wipeout-11574764205">the Wall Street Journal's Liz Hoffman and Phred Dvorak</a>. SoftBank declined to comment.Meanwhile, there are signs of turbulence at several SoftBank-backed startups.Earlier this week, Business Insider reported that <a href="https://www.businessinsider.com/zume-cmo-mark-crumpacker-executive-departures-softbank-startup-2019-11">SoftBank-backed robotics pizza company Zume is losing four key execs</a>, amid broader changes to its business. Two other startups, India-based Oyo and construction tech company Katerra, have come under scrutiny this week, while dog walking startup Wag's CEO announced her departure amid reports that the company is putting itself up for sale.Here's a look at a week that doesn't seem to reflect well on SoftBank:

SoftBank's Vision Fund has already had another difficult week, and this time its got nothing to do with WeWork

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Courtesy DecibelDecibel CEO Steve Holtzman</div></div></div><ul><li>Decibel Therapeutics, a company that's researching treatments for hearing loss, has struck up a somewhat unusual partnership with biotech giant Regeneron. </li><li>Instead of a deal that gives the larger company development and commercialization rights over a particular drug, this collaboration is aimed at giving Decibel access to Regeneron's scientific expertise. </li></ul> Decibel Therapeutics, a small startup that's looking for treatments for hearing loss, just landed an unconventional endorsement from Regeneron. Typically, partnerships between big pharma companies and small startups are formed to fill a gap in product pipeline or to give the bigger company access to technology it has the muscle to develop. That's not the case here, Decibel CEO Steve Holtzman told Business Insider. Instead, Regeneron will be providing the startup with scientific help to move things along. For example, Decibel could access some of the genetic information Regeneron's gathered in order to better understand the genetics related to hearing loss. "Regeneron is a power-house research organization," Holtzman said.Decibel's looking for therapies that can treat hearing loss, a condition that impacts <a href="http://www.who.int/mediacentre/factsheets/fs300/en/">360 million people</a> around the world. The aim is that - instead of using a device to hear - one day you might be able to take a medication to treat the condition. Currently, there aren't any <a href="https://medcitynews.com/2017/01/biotech-startups-hearing-loss/">medications used to treat hearing loss.</a> Decibel launched in 2015 after <a href="https://decibeltx.com/wp-content/uploads/2015/10/Decibel-Launch-PR-FINAL-for-101515.pdf">raising $52 million</a>. In July, the company said it had received an additional investment from GV, Alphabet's venture arm. While the exact financials of the partnership with Regeneron weren't disclosed, Regeneron will get equity in Decibel as well as receive royalty payments if Decibel's treatments get approved. On the scientific side, Regeneron will send in employees to work directly with Decibel, and the startup will have access to Regeneron's expertise in animal modeling for pre-clinical testing, antibody technology, and basic biology.This is the second time Regeneron's done this kind of partnership. The the first was in 2016 with Adicet Bio, an early-stage company that's building <a href="https://www.fiercebiotech.com/special-report/adicet-bio">immune cell-based treatments</a> for cancer and other conditions. What's different with the Decibel deal is that while Regeneron itself is working in immunotherapy, the company isn't at all in hearing loss, Nouhad Husseini, Regeneron's vice president of business development told Business Insider.The hope is to do more of these deals like this that leaves control in the hands of the startups, Husseini said. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/defrost-chicken-freezer-food-thaw-kitchen-safely-tips-2016-10">You're probably defrosting your food all wrong - here are 4 ways to do it safely</a></h3> <div> </div> </div>

A startup searching for a drug to treat hearing loss just got an unusual endorsement from a big biotech

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Kimberly White/Getty Images for TechCrunchJohn Foley</div></div></div><ul class="summary-list"><li style="font-weight: 400;">In <a href="https://www.youtube.com/watch?v=kAdp0R8B_rU">an interview with CNBC in 2018</a>, Peloton cofounder and CEO John Foley said the company was "weirdly profitable" for its size and age.</li><li style="font-weight: 400;">In <a href="https://www.sec.gov/Archives/edgar/data/1639825/000119312519230923/d738839ds1.htm">financial documents made public Tuesday</a>, however, the seven-year-old startup reported $245.7 million in net loss in fiscal 2019, up from $47.9 million in net loss in 2018.</li><li style="font-weight: 400;">The startup is <a href="https://www.businessinsider.com/fitness-maker-peloton-booming-as-it-prepares-for-an-ipo-2019-6">widely credited for spurring on the connected fitness craze</a>, and sells internet-connected at-home gym equipment and a monthly subscription to live and taped fitness classes.</li><li style="font-weight: 400;">The company was recently valued at $4 billion and has raised $994 million in private venture capital.</li><li style="font-weight: 400;"><a href="https://www.businessinsider.com/">Visit Business Insider's homepage for more stories.</a></li></ul>Turns out <a href="https://www.businessinsider.com/peloton-connected-fitness-files-for-ipo-2019-8">Peloton is burning cash</a> as quickly as its users burn calories. The startup, which makes <a href="https://www.businessinsider.com/fitness-maker-peloton-booming-as-it-prepares-for-an-ipo-2019-6">internet-connected fitness equipment</a>, publicly released <a href="https://www.sec.gov/Archives/edgar/data/1639825/000119312519230923/d738839ds1.htm">paperwork for its IPO</a> on Tuesday.Among other financial headwinds, the startup reported that it had quadrupled its annual net loss from $47.9 million to $245.7 million in just the last year. But in <a href="https://www.youtube.com/watch?v=kAdp0R8B_rU">an interview with CNBC in May 2018</a>, Peloton cofounder and CEO John Foley told reporters that the startup was profitable."We are profitable, weirdly. It's a beautiful business model. Our investors are happy," Foley told CNBC.That is weird indeed. And it's not clear what Foley based that statement on. In its fiscal 2018 year, which ended just two months after that interview, on June 30, Peloton posted a net loss of $47.9 million. In fact, according to its S-1, Peloton posted net losses for the past eight consecutive quarters. On an adjusted basis, excluding interest, taxes, depreciation, amortization and stock based compensation, Peloton still lost money in seven of those eight quarters. As can be seen in the chart below, only once - in the last three months of 2017 - did the company eke out an $800,000 EBITDA profit. <div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image on-image"><a title_source="Peloton" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/5d65cd682e22af24701f57d2-960/screen shot 2019-08-27 at 53440 pm.png"></a>Peloton</div></div></div>Peloton declined to comment on Foley's puzzling statement, or his definition of "weirdly," citing quiet period restrictions leading up to the company's IPO. The company said on Tuesday that it plans to list shares on the Nasdaq exchange under the ticker symbol "PTON."Read More: <a href="https://www.businessinsider.com/peloton-connected-fitness-files-for-ipo-2019-8">Peloton, the buzzy exercise bike startup that ignited the connected fitness craze, has filed for an IPO and revealed spiraling losses</a>Since <a href="https://www.businessinsider.com/peloton-ipo-filing-direct-to-consumer-marketing-2019-8">Foley started the company in 2012,</a> Peloton has raked in $994 million in private venture capital, <a href="https://my.pitchbook.com/profile/61931-08/company/profile#comparisons">according to Pitchbook data</a>. The New York-based company was most recently valued at $4 billion.Peloton's business model counts on high margins on sales of its proprietary fitness equipment and recurring revenue from monthly memberships. Its flagship connected stationary bike costs $1,995, and its newest product, a connected treadmill, costs nearly double that. Users then have to purchase a $39 monthly subscription for access to live and recorded fitness classes hosted by celebrity personal trainers. But all those classes come with a cost. Sales, marketing, and <a href="https://www.businessinsider.com/peloton-warns-of-reliance-on-premium-music-for-success-2019-8">licensing fees have all skyrocketed</a> for the startup in the past year, according to the filing.According to the startup's filing, more than 511,000 of its customers are monthly subscribers and it has sold 577,000 "connected fitness devices" globally. The company also said it has 1.4 million members, which includes all users that created a Peloton account online. <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/16-inventions-getting-us-off-fossil-fuels-and-into-renewable-energy-2019-8">16 inventions getting us off fossil fuels and into renewable energy</a></h3> <div> </div> </div>

Peloton's CEO once bragged on TV that the company was 'weirdly profitable,' but the startup's IPO filing reveals years of losses

<ul><li>It has also seen a 76% revenue growth, with it growing from ₹22.4 crores in FY18 to ₹38.6 crores.</li><li><keyword id="1947337" type="PERSON" weightage="20" keywordseo="Cashkaro">CashKaro</keyword> users can shop e-commerce sites like Amazon, Flipkart, Myntra and others to receive cashbacks.</li><li>In an interview with Business Insider, Swati Bhargava, co-founder, CashKaro explains how they cut losses.</li></ul>Cashback and <keyword id="608560" type="PERSON" weightage="20" keywordseo="discount-coupons">discount coupons</keyword> site Cashkaro cut down its losses from ₹1.6 crores in FY18 to ₹12 lakh in FY19. Its revenues grew by 76% from ₹22.4 crores in FY18 to ₹38.6 crores in the financial year ending March 2019. CashKaro helps users shop on e-commerce sites like Amazon, Flipkart, Myntra and others to receive cashbacks. It earns commission from the e-commerce players. “We are making more money because we have launched new cashback categories. Initially, Indian e-commerce was about a lot of mobile, electronics but we have diversified into beauty, mobile recharges, bill payments etc. These are high margin categories,” Swati Bhargava, co-founder, CashKaro told Business Insider. CashKaro was able to cut losses while increasing its headcount. It has gone from 78 people last year to 114 employees now. “We have streamlined our marketing a lot more, we used to spend on channels which are paid – Google, Facebook ads. Over the last one year, we did a lot more performance campaigns,” said Bhargava. Their campaigns were also targeted towards women and people in Tier 2 and beyond, where they see a lot of traction. “Until last year, our ratio of men and women used to be 85:15, now it’s 65:35,” she said.

How Cashkaro cut down its losses from ₹1.6 crores to ₹12 lakhs

<ul><li>SoftBank Group reported a record $8.9 billion net loss for the last financial year ended March 2020. </li><li>The Softbank Vision Fund had $75 billion invested in 88 startups but they were worth 7% less in value at the end of March.</li><li>The operating loss, before adding interest and tax, was $13 billion compared to a profit of $19 billion a year earlier.</li></ul>SoftBank Group reported a record $8.9 billion net loss for the last financial year ended March 2020 and this had a lot to do with falling valuations of <keyword id="357983" type="PERSON" weightage="20" keywordseo="Masayoshi-Son">Masayoshi Son</keyword>'s marquee investments in Uber and WeWork. The Softbank Vision Fund had $75 billion invested in 88 startups but they were worth 7% less in value at the end of March. The operating loss, before adding interest and tax, was $13 billion at the end of March, compared to a profit of nearly 2 trillion yen ( about $19 billion) a year earlier. <table style="width: 212pt;"> </colgroup> <tbody><tr> <td class="xl64" style="height:15.0pt;width:126pt">Softbank Group</td> <td class="xl64" style="border-left-width: initial; border-left-style: none; width: 86pt;">FY20 loss</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">Net loss</td> <td class="xl63" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">$8.9 billion</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">Operating loss</td> <td class="xl63" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">$13 billion</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">Loss from Softbank Vision Fund </td> <td class="xl63" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">$17.7 billlion</td> </tr></tbody></table> This is the first time in 15 years Softbank posted a loss because of ‘the deteriorating performance of its tech bets’. WeWork, the US-based realty company went under last year as a cloud of dirt exploded from under the carpet at a time when the company was looking to file for an IPO. As its financials were questioned, the <a href="https://www.businessinsider.in/stock-market/news/we-were-kings-of-the-world-weworks-adam-neumann-fostered-a-culture-of-superiority-at-the-troubled-coworking-startup/articleshow/74227820.cms">value of WeWork dropped from $47 billion to $8 billion.</a> Another one of its biggest tech bets – Uber has been on a downtrend since its listing. The market value of one of the most hallowed startups of all time is down 21.9% since its listing on Nasdaq in May 2019. SoftBank announced its largest ever share buyback to prop up their value in March. Son has already pledged two of every five shares in Softbank as collateral for loans. Jack Ma leaves the board Till date, Son’s most paid-off bet is considered to be the Chinese giant Alibaba. And now, the billionaire founder of Alibaba, Jack Ma, is set to leave the SoftBank board to focus on philanthropy. This will be the most high-profile exit from the Japanese investment group. SEE ALSO: <a href="https://www.businessinsider.in/retail/e-commerce/news/new-amazon-walmart-competitor-is-yoga-guru-baba-ramdevs-patanjali-e-commerce-orderme-app/articleshow/75798948.cms">Amazon and Walmart's newest competitor in Indian e-commerce is a yoga guru turned entrepreneur with a mass appeal</a> <a href="https://www.businessinsider.in/business/startups/news/experts-warn-startups-against-raising-funds-by-selling-equity-during-covid-19/articleshow/75798419.cms">Startups who need money during COVID-19⁠— don’t sell your stake now, warn experts</a>

Softbank's $9 billion net loss last year has a lot to do with Uber and WeWork

<div class="image-container float_right click-to-enlarge"><div class="image"><a title_source="Withings" title_caption="" class="zoomin" href="http://static1.businessinsider.com/image/51e6ef99eab8ea0f5f000035-960/withings-smart-body-analyzer-scale-2.jpg"></a><a href="http://www.withings.com/en/press/mediakits">Withings</a></div></div>Health tracking <keyword id="138263" type="UNKNOWN" weightage="60" keywordseo="startup">startup</keyword> Withings just raised $30 million from Bpifrance, Idinvest Partners, and existing investor Ventech, <a href="http://techcrunch.com/2013/07/17/withings-raises-30-million-from-bpifrance-and-others-to-fuel-international-growth/">TechCrunch reports</a>.
It plans to use the money to expand internationally. 
Withings is best known for its smart scales that track a person's weight, body fat percentage, blood pressure, and any given environment's temperature and air quality. 
Last month, New York investor Fred Wilson blogged about how <a href="http://www.businessinsider.com/fred-wilson-on-withings-scale-2013-6">he had hopped on the Withings bandwagon to help him lose weight</a>. 
But Withings creates more than just smart scales. It recently launched its own wearable activity tracker, <a href="http://www.withings.com/en/pulse">Pulse</a>, to compete against devices like Nike Fuelband, Jawbone Up, and Fitbit Flex. 
To date, Withings has raised more than $33 million.

This Weight-Loss Startup Just Raised $30 Million To Compete With Fitbit and Fuelband

<ul class="summary-list"><li>SVB's startup and VC customers are staring down huge losses after its failure.</li><li>Up to a fifth of the bank's uninsured deposits may not be recovered, according to Moody's estimates.</li></ul>The collapse of Silicon Valley Bank could leave startups and tech firms with losses that total billions of dollars. The Federal Deposit Insurance Corporation (FDIC) took control of <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-fdic-wall-street-regulator-finance-investing-2023-3">America's 16th-largest bank on </a><a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-fdic-wall-street-regulator-finance-investing-2023-3">Friday.</a> Customers at the failed lender have only the first $250,000 of deposits insured by the FDIC, meaning anything deposited at SVB above that amount is now at risk. The $250,000 sum is small change for many startups, founders, and tech firms dealing in tens of millions of dollars.<h2>SVB customers stare down big losses</h2>In a report on Friday, the <a href="https://www.moodys.com/research/Moodys-downgrades-SVB-Financial-Group-senior-unsecured-to-C-from--PR_474735" target="_blank" rel="noopener">ratings agency Moody's</a> said it expected a recovery rate of 80% to 90% for uninsured depositors."The key drivers of SVB's failure was significant interest rate and asset liability management risks and weak governance," Moody's wrote in its downgrade of the stock. "The significant deterioration in SVB's funding and profitability profile reflects high risk in its financial strategy and risk management."<a href="https://www.businessinsider.com/silicon-valley-bank-svb-particularly-scary-bank-failure-why-2023-3">At the end of last year SVB</a> had uninsured deposits in its US offices of $151.5 billion, equal to 88% of its total deposits of $173 billion, per its <a href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0000719739/f36fc4d7-9459-41d7-9e3d-2c468971b386.pdf" target="_blank" rel="noopener">annual report filed with the SEC on February 24</a>. While there were likely billions in deposits withdrawn prior to SVB's closure, there's still likely to be many billions left at risk.For example, just one company – the streaming outfit Roku – said in an SEC filing that it <a href="https://www.businessinsider.com/roku-held-one-quarter-of-cash-at-silicon-valley-bank-2023-3">held $487 million at SVB</a>, meaning it stood to lose as much as a fifth, or almost $100 million, as per Moody's estimates.SVB's deposits soared in recent years as it became the go-to lender in the VC ecosystem. <a href="https://www.svb.com/venture-funded" target="_blank" rel="noopener">According to its website</a>, SVB banked close to half of all US venture-backed startups by December.However, the sharp rise in interest rates in the past year hit its bond portfolio. <a href="https://markets.businessinsider.com/news/stocks/svb-silicon-valley-bank-collapse-jpmorgan-morgan-stanley-bank-stocks-2023-3?_gl=1*1lridnc*_ga*MTE0MTUxMjAxMi4xNjQ3ODczOTM0*_ga_E21CV80ZCZ*MTY3ODUyMTQ3MS4xMDgwLjEuMTY3ODU0MTYwOC4wLjAuMA..">A failed attempt at a $2.3 billion stock sale</a> to raise capital to offset losses on bonds led to a collapse in its shares last week.The scramble among investors to sell the stock in the wake of its failed equity raise added to unease about SVB.Meanwhile, major customers like <a href="https://www.businessinsider.com/peter-thiel-founders-fund-pulled-cash-svb-before-collapse-report-2023-3">Peter Thiel's Founders Fund</a> moved in recent days to pull their funds from SVB, per Bloomberg. Some encouraged the startups they back to do the same, fueling fears of a bank run.<h2>Race to avoid "extinction-level event"</h2>The window for SVB to avert catastrophic losses for its customers is narrowing.<a href="https://www.cnbc.com/2023/03/10/silicon-valley-bank-financial-in-talks-to-sell-itself-after-attempts-to-raise-capital-have-failed-sources-say.html" target="_blank" rel="noopener">The bank tried but failed to find a buyer before</a> the regulators closed the bank, and receivers <a href="https://www.businessinsider.com/who-will-buy-svb-silicon-valley-bank-acquisition-2023-3">continue to look for buyers</a> before markets reopen on Monday. Big banks such as JPMorgan as well as smaller lenders including Citizens Bank <a href="https://www.businessinsider.com/who-will-buy-svb-silicon-valley-bank-acquisition-2023-3">have been mooted as potential buyers</a>."The FDIC will love to have the bank bought off their hands, and I am sure they will work furiously over the weekend to arrange a shotgun marriage," said Sandeep Dahiya, associate professor of finance at Georgetown University's McDonough School of Business, <a href="https://www.businessinsider.com/who-will-buy-svb-silicon-valley-bank-acquisition-2023-3" rel="">told my colleague Hayley Cuccinello</a>. <a href="https://affiliate.insider.com/?h=48fe4d27cfd02a43faa47236d23babe55f633114f728671ad02d158599db35ae&amp;postID=640ca250310b0b414a34ae62&amp;site=bi&amp;u=https%3A%2F%2Fwww.theinformation.com%2Farticles%2Fbank-execs-on-svb-fallout-2-000-times-better-if-a-buyer-comes-in-this-weekend%3Frc%3Drlufcw&amp;amazonTrackingID=null&amp;platform=browser&amp;sc=false&amp;disabled=false" target="_blank" rel="noopener">In an interview with The Information</a>, Kristine Dickson, CFO of community lender Lead Bank, said it was would be "2,000 times better" if a buyer was found for SVB versus it being dissolved.If a deal can't be struck, the potential consequences for its startup and VC borrowers are dire. Garry Tan of startup accelerator Y Combinator <a href="https://www.cnbc.com/video/2023/03/10/y-combinators-garry-tan-estimates-hundreds-of-startups-will-be-unable-to-make-payroll-after-svb-closure.html" target="_blank" rel="noopener">told CNBC</a> that startups were facing an "extinction-level event" if the situation wasn't resolved. He said nerves were mounting over <a href="https://www.businessinsider.com/startups-silicon-valley-bank-worried-wont-pay-employees-next-week-2023-3">how startups will pay staff at the end of the month,</a> and cover other expenses.Major investors including <a href="https://www.businessinsider.com/mark-cuban-calls-federal-reserve-buy-silicon-valley-bank-debt-2023-3">Mark Cuban of "Shark Tank"</a> have called for the Federal Reserve to step in and buy SVB's debt, while billionaire investor Bill Ackman has urged the US government to pursue a <a href="https://www.businessinsider.com/silicon-valley-bank-bill-ackman-billionaire-government-bailout-svb-2023-3">"highly dilutive" buyout of the bank</a>.

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