Making Sense Of The Silicon Valley Bank Backlash
People don’t see the tech industry as they once did. And it almost cost the sector a rescue.
This is an excerpt from my weekly newsletter, Big Technology, published on Substack. Check it out here and sign up to receive it each Thursday.
In the early 2010s, hundreds of technologists would pack NYU’s Skirball Center for the monthly New York Tech Meetup. At the event, local developers would show off their latest products. And depending on the slate, you might see new dating websites, funny weather bots, or Foursquare plugins that made you look busy while you did nothing.
The meetup had just one rule: Show the tech. Anyone with a long preamble got “Get to the demo!” heckled at them. Founders who discussed their VC funding got booed. There was a feeling that tech was there to be useful, fun, and challenge the establishment. How you made money was secondary.
The obsession with demos was natural in the early 2010s, when the tech business was much smaller. Back then, people used desktops more than mobile devices. Business school students preferred to work at banks. And Google’s market cap was less than $200 billion. Hoodies, not suits, ran the industry.
As the economic opportunity in tech grew though, things changed. Bankers and finance professionals, looking to reinvent themselves after the financial crisis, found the tech sector. They became CEOs and COOs as the developers stood back. The New York Tech Meetup started putting more finance people on stage. They talked about their funding. They got booed.
For more on this, listen to my Big Technology Podcast episode with Om Malik and Chris Tolles on Apple Podcasts and Spotify.
After the government saved Silicon Valley Bank depositors though, many within the industry were surprised at the public’s unenthusiastic reaction. Companies banking with SVB would use their funds to pay workers and contribute to economic growth, but a chunk of the public still opposed protecting them, seeing it as a billionaire bailout. “My main learning from the SVB take firehose,’ tweeted Anduril engineer Luke Metro, “is that very few ppl outside of tech view funded early-stage founders as scrappy underdogs instead of the bourgeois.”
The perception change mattered — it almost stopped the administration from stepping in — and it’s at least somewhat related to the shift on display at that meetup.
The financialization of tech was necessary, in some ways. As computing grew ubiquitous, especially with the rise of the smartphone, the market opportunity for technology products exploded. The moment called for financial rigor, planning, and — yes — VC funding. And financially minded people soon pushed the tech industry into an exceptional economic position.
But the tech sector, or at least parts of it, then trended into over-financialization. Instead of thinking about what problems they could solve for people, some companies looked only at growth and margins. They acted extractive, not like the startups at demo day. Doordash, for instance, counted tips toward its minimum delivery worker payments, changing only after an uproar. And as this happened, VCs — not builders — became the tech industry’s most recognizable names.
Either by working for these companies, or knowing someone in their lives who did, many people felt the impact of this over-financialization. The companies’ quest to squeeze just a bit more money onto the balance sheet had a cost, albeit not an apparent one. When it came time to save tech companies, some preferred to burn down the system vs. keep it going. It made it difficult to find political consensus at a crucial time. As Founders Fund’s Mike Solana put it, “If there’s one thing I’ve learned over the last few days it’s tech is no political party’s ‘darling.’”
Through a furious weekend, the tech sector won over the White House and got its rescue. The move was common sense. But the struggle was instructive. Through no fault of their own, tech startups were pushed to the brink. Now granted new life, it’s time to get back to the demos.