Silicon Valley’s smartest bet

Among the many things the collapse of Silicon Valley Bank has revealed is the vast disconnect between how the tech industry is perceived from the outside versus how it sees itself. Within the Valley, those of us involved in the so-called innovation economy tend to see ourselves as upstarts and disruptors. What’s become clear to me over the past few weeks, when a decade of SVB shots and lit tweets have been scribbled and spoken, is that this isn’t necessarily how the rest of the world sees us.

To the general public, everyone from venture capitalists to Big Tech CEOs to founders is a monolithic cadre of wealthy elites with outsized influence on society. While I recognize that the critics might have been right when it comes to, say, billionaire VCs or Elon Musk, I vehemently disagree with their similar treatment, during the SVB crisis, of startup founders. Founders were often painted with the same broad brush and decried as “tech bros” who should have known better and received their reward for not being diligent enough with the institution that held their funds.

Commentators of this ilk are not only being unfair, they are deeply ignorant of who most tech entrepreneurs are and what their lives are like.

First of all, they are not all brothers. I know many founders, women and men, who were scrambling to find adequate cash for their working capital needs for the coming weeks after SVB closed. This is the group that experienced the most difficulties when the bank went bankrupt. The only thing scarier than not getting paid is not being able to pay your employees, and some founders have transferred their life savings to do just that. They’ve moved their company’s bills, for everything from their office lease to Slack to personal credit cards. In the scary and uncertain days before regulators announced they were returning all depositors whole, much of it went to founders personally.

Also, to say it was their fault for not planning for SVB’s ill-fated asset management strategy is just plain silly. An entrepreneur’s job is to construct products, not to analyze whether long-term loans held to maturity were marked to market. Expecting depositors to do the math on whether their bank is adequately covering interest rate risk is like expecting passengers on a flight to have personally inspected the engines of the aircraft. plane before boarding. The founders are not, by and large, financiers. These are people trying to solve a huge problem with limited resources and build a business around that solution. And while every startup founder I know is now giving themselves a crash course in cash management best practices, fundamentally they are builders, not bean counters.

Experts who think startup entrepreneurs travel in Elon Musk circles have no idea what startup life is like. Being a founder isn’t usually about glamour. It is one of sacrifice. Running a startup means accepting a meager salary, enduring endless hours and going to bad offices (or after Covid, no office at all). People are giving up cushy, well-paying jobs, they’re giving up nice hours, they’re taking out second mortgages on their homes, and they’re giving up the notion of work-life balance altogether — all in pursuit of a dream.

(For a more accurate picture of the realities of startup life, watch this video about the experiences of 25 founders.)

The founders are the beating heart of what I consider to be the real Silicon Valley. Not the loud, very online Silicon Valley celeb that has such a hold on the wider imagination. But the low-key Silicon Valley. One of thousands of little-known outsiders who work in the dark every day trying create something because it deserves to exist in the world. The Silicon Valley of generations of visionaries trying to invent the future in a garage. By Sergei Brin and Larry Page trying build a search engine in a garage in Menlo Park. By Steve Jobs and Steve Wozniak trying build a personal computer in a garage in Los Altos. Of Gordon Moore and the other seven “traitors” trying making silicon transistors in a garage in Palo Alto.

It’s not their success that’s the spirit of what makes this little slice of land so special – because the vast majority of startups don’t succeed – it’s that they dared at all. It is the attempt to do something great.

And what a year it’s been to even make the attempt. Eight hikes in the fed funds rate sent the cost of capital skyrocketing nearly 20 times. The S&P and crypto indices have been emptied. The IPO window is frozen and late-stage private valuations have fallen by a third. This was all before the week – when the favorite tech bank folded in the space of hours – that a whole generation of entrepreneurs will talk about for the rest of their professional careers.

It takes a breed of entrepreneurs doing even tougher things than usual to overcome these shocks and keep building. But if they can survive this time, they can survive anything. It’s those individuals – not all the noisemakers and their equally loud detractors – that I pay attention to and take risks on. People who believe in the possibilities of technology, who see business as a constructive good for society, who try to create things of value and who will not be discouraged in their ambitions. Bet on the founders. I always go.