The sudden collapse of the top Silicon Valley lender SVB Financial Group has sent shock waves throughout the tech world, leaving tech startups scrambling to make payroll this month, which could be followed by a wide wave of failures and layoffs in the tech industry.

The startup-focused lender, known for extending banking services to early-stage startups and funding projects deemed too risky for traditional lenders, has long been considered the lifeblood for tech startups.

With approximately $209 billion in total assets and $175.4 billion in total deposits at the end of last year, the 16th largest bank in the U.S., however, was closed by California's banking regulators on Friday due to "inadequate liquidity and insolvency."

Read more: U.S. weighs new fund to backstop deposits if more banks fail, Bloomberg News says

The FDIC said Friday that all accounts would quickly get access to the insured portions of their deposits, but the rest would depend on how much is recovered from sales of the bank's assets, an often lengthy process. This has left startup founders worried about whether they'll be able to keep paying their employees.

Startup founder Brad Hargreaves said some firms may not be able to make payroll next week, and because boards are incredibly sensitive to employing workers they can't pay, he said, "Expect mass layoffs later today, Monday at latest."

Close to half of U.S. venture-backed tech and healthcare firms that listed on stock markets in 2022 were SVB customers, leading many to fret about the fallout from the bank’s collapse that will ripple through the already battered tech sector, which had seen mass layoffs in recent months.

Garry Tan, head of the well-known incubator Y Combinator, said in a tweet that "the real victims of the SVB fallout are the depositors: startups with 10 to 100 employees, who cannot make payroll, and will have to furlough or shutdown workers as soon as Monday."

He also warned that "years of U.S. innovation" are on the line, as an entire "generation of American startups" could be destroyed in a month or two.

Top U.S. investor Bill Ackman raised a similar alarm on Twitter, saying that SVB's collapse "could destroy an important long-term driver of the economy."

"If private capital can't provide a solution, a highly dilutive government preferred bailout should be considered," he said.

Voices from tech and finance are increasingly calling for the federal government to push another bank to take over the failed Silicon Valley Bank, reported CNBC. According to several U.S. media reports, SVB had discussed a possible buyout with several banks on Thursday and Friday, but could not find a solution quickly enough.

(With input from AFP)