The tech industry got what it wanted on Sunday when the federal government announced it would ensure depositors of Silicon Valley Bank would get all their funds back following a run that crippled the institution. Now, people in tech are finding out the price the sector will have to pay in return – including a damaged reputation, political anger and hurt pride.
Tech workers, startup executives and wealthy investors are gearing up for a possible reckoning after the Biden administration guaranteed that SVB depositors would be able to access all their funds even at the Federal Deposit Insurance Corp.’s $250,000 guaranteed amount.
The need for emergency government action was the latest black eye for an industry whose reputation has taken repeated blows over the past few years, and it runs counter to the anti-government, anti-regulation ethos that many tech investors have promoted. .
Billionaire venture capitalists such as Peter Thiel have been accused of exacerbating the crisis last week by advising startups to pull money out of banks, while helping other tech figures oppose government action for others and then swiftly for themselves. Has faced accusations of hypocrisy for making the demand.
Margaret O’Mara, a historian of the tech industry and professor at the University of Washington, said that after years of scrutiny from politicians and regulators, many in Silicon Valley thought they were given credit for the rescue.
“There’s this kind of defensiveness: ‘Look, we’re this innovation economy, and we’ve contributed so much, and there’s no question that this should be addressed,'” she said.
The potential fallout could include new regulations, class-action suits, and more reputational damage to an industry that had a lot to offer — all on top of massive layoff tech companies.
David Sachs, an investor and frequent critic of the Biden administration, was among the loudest voices online Urging for help for the tech industry, defended himself this week, saying he was only reacting to the crisis after it began. He blamed for Mismanagement in the bank and crisis over rising interest rates.
“This is shooting the messenger,” he said Monday during an appearance on CNBC. “We were drawing attention to a problem that needed to be solved immediately. I think it was constructive.
While other regional banks are now receiving scrutiny, SVB was in some ways uniquely vulnerable. Founded in 1983 in Northern California, the bank was closely tied to a volatile industry and held operating cash for several underserved startups. An unusually high share of its deposits were not insured by federal regulators — about 89% as of December.
Over the weekend investors and small businesses alike rallied to the bank’s defense, writing letters and signing petitions to Congress, but they were not able to avert the collapse.
“Where was anyone saying, ‘We know the interest rate environment is going to change. Maybe we should try a different strategy?’ O’Meara said.
The fact that California’s brightest tech and financial minds didn’t see trouble coming – let alone prevent it – was not lost on many observers. And in fact, the bank’s CEO, Greg Baker, called for more lenient regulations in 2015. .
“Our society desperately needs irresponsible, egotistical VCs and techbros to experience truly painful consequences for their failures,” said data scientist and drone researcher Fain Greenwood. wrote on Twitter.
Some worry that the tech industry isn’t putting forth its best spokespeople.
Om Malik, a former technology journalist who is now an investor in True Ventures, said in a phone interview, “There are some voices on social media that are loud and strident and they don’t speak for technology.”
“All of the real problems we experienced over the weekend as a community were brought to our attention by people who weren’t on Twitter,” he said. Credit must go to those who were working behind the scenes, including rank-and-file employees of Silicon Valley banks who have expertise in the startup world.
It is not clear to what extent investors and other tech influencers caused the crisis, but as of Friday morning, many of them were advising the companies in their portfolios to withdraw deposits from SVB — a threat to the bank from reality. convert into
For some, it was an indictment of the entire culture of Silicon Valley, the geographic region roughly centered on the southwest coast of San Francisco Bay.
“I don’t know who needs to hear this, but if the wealthiest people in your community run a bank instead of stepping up to end it, then what you have on your hands isn’t really ‘a community,'” EW Niedermeyer, author of a book about Tesla, wrote on Twitter.
Philip Rosedale, founder of virtual reality platform Second Life, said the bank run is an example of venture capitalists’ selfishness and mistrust of each other.
“Imagine if all these VCs were in a room,” he said in an interview with the South by Southwest, Austin, Texas, tech conference as the crisis unfolded.
“Think what everyone would say about that one person who’s like, ‘I’m telling all my people to get their money out right now,'” he said.
By Monday, some venture capitalists had stepped forward to celebrate the rescue. Ron Conway, a prominent San Francisco-based venture capitalist, said in an email that his investment firm is “continuing to pursue a positive outcome to help SVB’s thousands of small business clients resume business with normalcy.” and was able to deploy a policy/government relations network.”
At a dinner in San Francisco on Friday, he pitched his case to former House Speaker Nancy Pelosi and former President Barack Obama, who called the rescue “the Ron Conway bailout,” according to the news website Puck.
However, other investors have been prepared to push back against the criticism. Sriram Krishnan, a general partner at venture capital firm Andreessen Horowitz, said on Twitter that he’s realized over the past few days that people don’t appreciate the value of the tech industry.
“We need to do a better job of telling our story or our enemies will do it for us,” he said. Said, He did not say who the enemies were, and did not respond to an interview request.
