After three decades of being part of the Silicon Valley ecosystem — as a reporter, writer, entrepreneur, and investor — I thought I had seen it all. The boom-bust cycles, stock market manias, startup insanity, attack on America itself, and the most significant financial calamity in nearly a century — living through history prepares you for every eventuality. Your own struggle with mortality prepares you for the unpredictability of everything. You embrace the impermanence and become one with it. And despite all that, you experience what Silicon Valley has experienced this weekend — a sense of helplessness, a feeling of dread, and, more importantly, a sadness about the fragility of our community.
This past week, the federal regulators took over Silicon Valley Bank. I won’t repeat what has been reported in the media (Insider and Axios have ongoing coverage.) I won’t share how we got there — these two links explain the problem quite well. However, what I will do is share what I am feeling — this might be the worst weekend I have experienced as part of the technology community.
The bad news was like an inflatable marionette outside a car dealership when the dot bomb hit, swaying, falling, and rising with the shifting winds. The exodus, painful as it was, played out over a long period. It was quickly superseded by the American Tragedy of 9/11 when we as a country lost ourselves. The 2008 financial crisis was another rude reminder that Silicon Valley wasn’t as decoupled from the larger economy as we thought. It was still again something we could prepare for by taking preventive measures.
Nothing compares to this weekend. We are in the grip of the unknown. It doesn’t matter who you are — founders or investors — we are all shell-shocked by the suddenness of the events. The same ‘what if’ that has been a source of strength here in Silicon Valley this weekend feels like a noose. And despite many taking preventive actions, hundreds of founders are now wondering if they can make payroll next week. If not, what happens to the employees and those who rely on them for their own employment and financial needs? The spiral of negativity can be self-consuming.
The grapevine of Silicon Valley is in overdrive this weekend. I have heard all sorts of commentary, rumors, and expressions of futility in various Telegram groups, iMessage threads, and emails. This feeling of helplessness and futility while waiting for the new week to arrive is agonizing.
What’s worse is we currently have no leadership in the proverbial valley. We have a few loud voices that are extraordinarily self-serving and devoid of empathy. Others are using this as an opportunity for self-marketing. I am unsure if anyone is out there explaining to our leaders in Washington, DC, that there is a real risk to a sector where America leads. The anti-tech sentiment has clouded Washington’s understanding that this is more than a simple bank crisis. And why blame Washington — California’s elected officials, including Governor Gavin Newsom, who are happy to have an opinion about everything, have nothing to say.
Many experts are dismissing SVB as a regional problem — it is anything but “This is what the Fed wants to see. It’s a run on the business model of this bank. Not a run on the business model of banking in general,” said Steven Kelly, a senior researcher at the Yale Program on Financial Stability told the Washington Post. First, Kelly should read the recent comments of the FDIC chairman — this is a broader issue across the entire ecosystem and not just a local bank problem.
More importantly, SVB is not just a bank, it was at the heart of the American innovation economy. Whether politicians and media like it or not, the technology sector is one of the few engines of growth that we have in the US. The long-term war with our new geopolitical rivals will continue to be fought on the technology front. A disruption in the innovation ecosystem means a setback whose impact will be felt over the long term. I can understand that the general population, populist politicians, and media have faint regard for Uber-rich tech giants, blowhard billionaires, and the lack of empathy and morality in emergent technologies — but that’s missing the forest for the trees.
Sorry for my soliloquy on socio-political topics. I usually shy away from politics, and growing up in India has made me highly suspicious of politicians and their objectives. So back to SVB and its unique place in our ecosystem.
At the end of 2022, it was the 16th largest bank in the US, with over $200 billion in assets. According to the FDIC, nearly 89 percent of SVB’s $175 billion in deposits were uninsured at the end of 2022 — that’s a massive number, as most of it was from the technology ecosystem. Those numbers don’t capture how SVB is part of the ecosystem.
When explaining to a non-technology friend about the role of SVB, I compared them to the old “Facebook Connect Login.” An outage that showed its brutal impact in the unlikeliest places, and you will see it with SVB as well.
Imagine being a founder today and knowing you might have access to $250,000 sometime next week — or not? What do you do then? What are your choices? Do you keep going, or are you out of business? Again, the dreaded “what ifs.” Dan Primack, the veteran chronicler of the venture community’s foibles, succinctly writes: “This weekend is everything for Silicon Valley Bank and its customers.”
As the weekend progresses, it is clear that more than a bailout, the SVB needs a white knight, someone who can come in and take over the bank. If that happens, we can see something akin to normalcy return. “Silicon Valley is kinda screwed if no one buys SVB this weekend, and deposits remain frozen (or mostly frozen),” Primack quipped on Twitter.
Waiting for the next shoe to drop, I can talk about the role of SVB in the history of Silicon Valley. I got to know folks from SVB in 1992 when they were a tiny bank caught in a real estate shitstorm. They were starting to diversify aggressively into the ecosystem. Over the decades, they created programs to support startups, founders, and their employees. They knew the startup ecosystem intimately and understood the needs of “tech” long before it became an asset class.
SVB was willing to put people ahead of everything. I know this first-hand when my own company was going through a tough time. They were the only lender who cared enough to step up — not the others. They didn’t abandon a lot of people after the dot-com bust. The relationships they built are why they became what they did. The 16th largest bank in the country. Now gone — poof!
Recrimination and finger-pointing are for others — I speak as someone who has been in this community for a long time. We (and I mean the tech ecosystem) must realize what we are losing. Sure, the big banks will come and replace SVB, and they will have more money. But they will be there first and foremost for the transactions and the profits, not the betterment of the tech ecosystem.
Sitting here on a rainy Saturday morning, I can’t see the horizon that greets me every morning. But I know it is there, and we have to believe it is there. The weekend might be my worst, but the days to come will be better.
March 11, 2023. San Francisco
6 thoughts on “A Tough Weekend”
I wrote about similarities between this moment and 1981 in Houston. Oil banks were broken and the industry was down for a very long time
Thank you for sharing that nugget of insight.
It is my sincerest hope that one of the US’ giant banks is that white knight and that they keep the spirit of SVB alive. I think it could be relatively easy to do. But I think JPM-Chase’s experience after having to take over Bear Stearns and WaMu may rule that out. They had to pay a lot of fines for other companies’ poor judgment.
For now, life has returned to normalcy for all the startups and we were able to move forward as a collective industry. Thanks for your concern. It is really appreciated.
What an insanely wild and stressful weekend indeed. Thanks for capturing the magnitude of the moment using all of your experience to cast a great historical lens through which to view it and appreciate this incredible ecosystem.
Your comments struck a chord and reminded me of a post this week from a friend: https://www.linkedin.com/posts/kevinlawver_svb-siliconvalleybank-siliconvalley-activity-7042176606513061888-T_Dt?utm_source=share&utm_medium=member_desktop
Fortunately, there are good people among us still.
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