Dear friends,
Last week, Silicon Valley Bank (SVB), Signature Bank, and Silvergate Bank suddenly collapsed. If it passed uneventfully from your point of view, good for you! Many companies worked nonstop through the weekend scrambling to preserve funds so they could pay their employees.
Numerous tech startups and small businesses bank at SVB, and many are among the business pioneers who are bringing AI to market. For example, when AI Fund, which I lead, works with entrepreneurs to build new companies, we used to help them set up accounts with SVB.
Last Wednesday, SVB announced a $1.8 billion loss. The next morning, rumors began circulating via text, email, and Slack about a bank run in which customers were withdrawing funds en masse. When this happens, depositors can lose money they’ve saved beyond the $250,000 limit the FDIC (a U.S. government agency) guarantees. Without access to their money, companies can’t pay employees who are counting on a paycheck to cover expenses. A permanent loss of funds would lead to numerous layoffs and company shutdowns.
While navigating the collapse of SVB, I was fortunate to be able to call on friends and allies. Several CEOs of AI Fund portfolio companies share a Slack channel and have pre-existing relationships, so none of us felt alone. We were able to share information, make introductions to new banks, and lean in to help each other. Over the weekend, the AI Fund team went to many CEOs and pledged funds from AI Fund’s management company to make sure they could cover their payrolls.
I also saw the best of the AI and tech worlds last week beyond the AI Fund ecosystem. As new information developed, executives at many companies shared it across their networks, and we worked our way through the crisis cooperatively. I’m grateful that we were able to face the storm together.
On Sunday, the U.S. government wisely announced that it would protect all depositors’ assets. This calmed the crisis and helped to head off a domino effect of further bank failures.
Candidly, I was stressed from Thursday through the weekend about the fate of numerous people and companies. And I know that this is not the end of the challenges. Here’s what life has been like for an AI innovator in recent years (h/t @ChrisJBakke):
- 2020: Let’s see you handle a pandemic!
- 2021: Deep learning has diminishing returns.
- 2022: Generative AI is here! Time for massive FOMO.
- 2023: Your bank shut down.
I expect life to be equally dynamic in the future as well — hopefully with more ups than downs. But the fact that many people in AI have a network of trusted friends will enable us to react quickly and work together to benefit everyone.
Keep learning!
Andrew