The collapse of Silicon Valley Bank has spurred a lot of uncertainty and outright confusion over the future of Big Tech and the broader economy.
On Monday, President Joe Biden held a news conference in an effort to assure people that the nation’s banking system isn’t facing a widespread collapse.
With chips yet to fall, here are just a few reasons to be concerned about SVB’s struggles, as well as the federal government’s search for a buyer to take over the bank.
Many startups will suffer
First, let’s dispense with the idea that SVB’s clients are all Silicon Valley bros, of the Elon Musk and Peter Thiel sort. That’s not true. In fact, many of them run tech startups.
Check out this Insider writeup on the impact of SVB’s collapse on smaller companies. The New York Times offers another example of this impact, noting that SVB worked with more than 1,550 climate technology companies.
And here’s a CNN interview with Alison Greenberg, the CEO of a telehealth company, who describes the impact of the bank’s collapse. She says she received word from one of her seed investors Thursday that she and her co-founder should take their money out of SVB.
The fact Greenberg received such a heads-up from an investor is quite interesting. And leads to my next point.
Venture capitalists could make a killing
Economic experts and lawmakers have already floated suspicions about the collapse, including the timing of executives’ withdrawals.
On top of that, SVB’s fall has already precipitated a transfer of wealth from smaller regional banks to some of the largest in the country, with some investors showing trepidation and seeking more stability.
Writing for The Verge, senior reporter Elizabeth Lopatto noted another potential pitfall, predicting we’ll soon see scammers targeting “panicky” tech bros with offers to help.
That leads me to my final point.
The Elon problem
The federal government is looking for potential buyers to take over SVB and service its thousands of clients.
Twitter’s right-wing owner, Elon Musk, has already claimed he’s “open to the idea,” which ought to be a helpful reminder of the potential hazards in a sale. Musk, a tech entrepreneur in his own right, would effectively control the finances of some of the country’s pre-eminent tech firms. Those companies could be competitors of his and deploy technology — health technology, surveillance technology and more — that he may want to influence.
Musk taking over SVB appears to be a long shot. Nonetheless, I’m calling this the “Elon problem” because boosting his power over the tech industry seems like a glaringly obvious danger.
And the same could be said of any number of tech bros. The truth is that any large entity that takes over SVB might have similar influence over the direction of America’s tech future, and we all have a vested interest in making sure it falls into the right hands.