Artifact, the new personalized news app from the co-founders of Instagram, is another start-up whose funding was tangled up in the Silicon Valley Bank bankruptcy, and co-founder Kevin Systrom believes there could be more trouble to come for Silicon Valley. The founder revealed in a recent interview that the team had 100% of Artifact’s money with SVB before the bank went bankrupt. However, unlike many other startups hit by the banking crisis, Artifact’s co-founders found themselves in the fortunate position of being able to self-finance their startup, if necessary, and planned to lend the company money to keep it afloat. hold.
As it turns out, Artificat’s financial crisis was short-lived. Systrom tells us that after the government took control of SVB, Artifact has since reclaimed all funds and has had no issues in that regard.
The founder had previously shared Artifact’s SVB exposure in a conversation with journalist Kara Swisher at SXSW, which has also been published on her “On With Kara Swisher” podcast.
When asked about Artifact’s exposure, Systrom replied “what’s 1% over 99%?”, before confirming that yes, 100% of Artifact’s money was locked up at the bankrupt bank, now under the control of the federal regulator. However, he added that Artifact could have moved forward because it’s still small — just seven people — and because the co-founders had “enough personal liquidity” to figure out how to lend the company money, he said.
Systrom also acknowledged in the interview the fortunate position he and Instagram co-founder Mike Krieger had regarding the failure of SVB and its impact on their new company.
“There are other companies locked up at exactly the same percentage that not only have to pay payroll, but they have all these bills – and people don’t just have this money lying around. You can’t just hand it out,” Systrom said.
Yet the founder, like many other entrepreneurs, was caught off guard by the collapse of the bank. list your expectations.”
He also suggested that the problem with the bank may have been related to Silicon Valley’s herd mentality, adding that he hadn’t made a conscious decision to partner with SVB in the first place.
“As you find out in Silicon Valley — whether it’s asset managers or accountants or lawyers — there’s a herd mentality and no one actually asks each other why they use any service. If you’re an entrepreneur, one of my lessons is “ask why” – do some due diligence. And I think that’s important because you never really know what you’re getting yourself into. But there are a lot of, oh, so-and-so company uses X, Y or Z, we should use them,” he said. “And that causes problems in the long run.”
He further warned that the banking crisis was just a hint of the “bad things” to come for the Silicon Valley technology ecosystem, pointing out that each crisis has been accelerated by rising rates. And with a bank failing, there may have been cascading effects – for example, when one company can’t pay the other, there’s the potential for consequences.
“My feeling is that when there are good times, you really have to worry in Silicon Valley,” like “when companies that you know are stupid ideas rake in tens of millions of dollars; when people are throwing outrageous parties,” he said.
Systrom himself was just old enough to have watched the Valley’s other boom-and-bust cycles from a distance—in 2000 he was fresh out of high school and in 2008, fresh out of college.
“I saw both crises from a distance. And the patterns just repeat over and over. But you realize that no one cares. Because as long as you make money along the way, it’s like musical chairs: if you can just find a seat before everything collapses, you’ll make a lot of money and go away and be happy,” Systrom said. “But it turns out there are a lot of people with no seats at the end of that, and I think that’s crushing for the Bay Area, which in general is already dealing with massive wealth inequality.
“My point is that it was very clear that the writing was on the wall – that bad things were going to happen… I think the SVB thing is about 5 or 4 percent of the bad things coming,” he added up to it.
Image Credits: artifact
The extensive interview also touched on other topics, including Artifact’s ability to compete with Twitter, whether the US should ban TikTok, the state of crypto, what’s going on with Instagram these days, and its approach to Artifact as second entrepreneur. — where he is expected to have learned and adapted from missteps in building Instagram, among others.
About the latter, he indicated that the tech industry now looks very different than when he started Instagram.
“I think the era where technology can just do what it wants is hopefully long gone, because it’s important that people think about the implications of what their company is going to do before it gets to that point,” Systrom said.
He also noted that while he believed in the underpinnings of Web3 and crypto, he saw too much hype, people losing money and people manipulating consumers.
“I think that’s why technology gets a bad rap,” he said.
On Instagram, Systrom lamented, “We’ve lost the soul of what made Instagram Instagram.”
“I used to be able to go ahead and see what my friends were doing and see what my family was doing. I think the problem is that the incentives are always to go to more commercial, more makers, more deals, more ad dollars.
As for Twitter, meanwhile, Systrom believes the jury is still out.
“It’s unclear if the chaos will be positive chaos…sometimes chaos leads to creativity and new products and new ways of thinking.” But, he added, whatever happens on Twitter will not benefit Artifact because they are very different products.
He also stated that he was against a full ban on TikTok in the US, but said it deserved scrutiny. After all, China does not allow our social networks, such as Facebook and Instagram.
“I don’t think it’s crazy to say we should look very closely at it,” Systrom said of ByteDance’s video app. “I don’t think we should ban it. But I think we need to figure out how to run it independently within the United States. I think that’s a very smart plan.”