I came to Austin for tech’s biggest party and witnessed a surreal scene as Silicon Valley Bank crumbled

March 17, 2023, 2:09 AM UTC
Jordan Vonderhaar—Bloomberg/Getty Images

As he stumbled into my shoulder and grabbed my wide-framed glasses, the inebriated startup founder made an observation apparently intended to serve as a greeting: “You look like you’d be a journalist.”

When I confirmed his hunch, he wanted to know if I was covering Silicon Valley Bank.

Half of his funds were locked in the now defunct bank, he told me between sips of his beer, and all his customers were similarly chained to their SVB bank accounts. It wasn’t looking good for his company, he said, but what can you do? 

“The media caused this too,” he then added. I shared a joke I had read, that founders are incapable of not following a trend even if it hurts them. He laughed, shrugged, and took another sip. “That’s true.” Then he got straight to grilling me about my politics and my thoughts on Elon Musk, slurring his words with wild amusement even as others around us cringed.

It was Friday night and I was at a “tech and business leaders” party in Austin, for South by Southwest. The annual celebration of the startup zeitgeist – from buzzy app launches to venture capital dealmaking – was back in full force after years of pandemic disruption. But as if by some cruel poetic twist, the financial institution that has long underpinned the tech industry, the aptly-named Silicon Valley Bank, was melting down just as the party was getting started.

If there was a perfect place to bear witness to such a historic moment, this had to be on the shortlist. During my several days at SXSW, as the event is called, I discovered a messy jumble of shock, sorrow, insouciance, and sometimes glee over the necessary escape.

What I didn’t encounter very much–at the parties or at the event’s many on-stage panels and talks–was deep, rigorous discussion or reflection about what was, and could still be, a major economic blow to the tech industry.

In the span of a few days, Silicon Valley Bank experienced one of the most significant bank runs in recent history, as venture capital firms like Coatue Management and Founders Fund advised their portfolio companies to withdraw their funds, resulting in $42 billion of deposit withdrawal requests in one day. On Friday, just as thousands of plane-ferried techies touched down at Austin Bergstrom International Airport, Silicon Valley Bank was taken over by government regulators.

Many of us spent our first hours glued to our computers and phones. A VC told me that mid-flight to Austin from New York, he got texts from colleagues telling him “not to panic” before he landed to a litany of meetings to perform damage control with founders. An SXSW panel featuring former Thiel fellow and VC Laura Deming was punctuated by her checking her phone because she was “just waiting on a wire to get [her fund’s] money out,” TechCrunch reported.

Then there was me, who, instead of spending the first hours of the festival at parties or cozying up to the well-connected, was pecking away at my keyboard in an Airbnb, sweating in a chair from a combination of the 50% humidity and adrenaline. I was writing the day’s Datasheet newsletter, and just as I finished my draft, SVB went kaput.

When I finally arrived at the conference center, I could feel a feverish buzz in the atmosphere. Violet-colored SXSW-branded sweatsuits adorned by herds of young and curious attendees were ubiquitous downtown. Some have said A.I. was the biggest loser of the conference, pushed aside by the frenzy surrounding the SVB collapse. But that message clearly didn’t get through to the A.I.-obsessed crowds I saw. I couldn’t even get into the jam-packed room where OpenAI’s cofounder was speaking – even the overflow room with two 40-inch TVs live streaming the talk was full.

That’s not to say that people were ignoring SVB. I didn’t have (or eavesdrop on) a single conversation where the topic of SVB didn’t come up.

Interactions similar to the stumbling tech founder became a semi-regular occurrence at the conference. I was grilled on articles and tweets I didn’t even write. The one that came up the most was from the author Edward Ongweso Jr. who wrote that “euthanizing” venture capitalists “is imperative if we want a better world.” A tongue-in-cheek comment that a16z’s Marc Anderseen equated to the newspaper of the nazi party, because of course. 

By Monday night, people seemed to be in good spirits again, and for good reason. SVB was bailed out, the frantic work calls had slowed down, and everyone was able to let out a sigh of relief and get back to letting loose.

I wound up at a “tech” party on the outskirts of downtown with a line around the block. A new friend I met at the conference had put it together, so I was quickly courted off to an exclusive lounge that could only be described as the property owner’s clubhouse. There were so-called dinosaur bones, multi-color crystals on every surface, a bow and arrow encased above the bar, and an antler chandelier. A  rattlesnake—I couldn’t tell if it was alive or stuffed— lay inside a cage with a “Do Not Touch” sign that warned “not only will this kill you, it will hurt the whole time you are dying.”

Meanwhile, a strangely familiar-looking guy ambled about the room, clutching an acoustic guitar and seemingly oblivious to the fact that music was already being provided by a loud EDM soundtrack. He looked like the stereotype of a young startup founder. I asked the person next to me if he knew who it was, but he just shrugged.

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