Artifact co-founder Kevin Systrom talks about the SVB crisis, its subsequent impacts, and the future of technology
Artifact, the new personalized news app from the Instagram co-founders, is another startup whose funding has been caught out by the failure of Silicon Valley Bank, and co-founder Kevin Systrom thinks there could be have more trouble ahead for Silicon Valley. The founder revealed in a recent interview that the team owned 100% of Artifact’s funds at SVB prior to the bank’s failure. However, unlike many other startups hit by the banking crisis, Artifact’s co-founders were fortunate enough to be able to self-fund their startup, if needed, and planned to lend the company money to keep it going. flow.
It turns out that Artificat’s financial crisis was short-lived. Systrom tells us that after the government took control of SVB, Artifact has since recovered all funds and has no further issues on that front.
The founder previously shared Artifact’s SVB exhibit in a conversation with SXSW reporter Kara Swisher, which was also posted on her “On With Kara Swisher” podcast.
Asked about Artifact’s exposure, Systrom replied, “What’s 1% to 99% better?” However, he added, Artifact could have gone ahead because it’s still small — just seven people — and because the co-founders had “enough personal cash” to figure out how to lend money. money to the company, he said.
Systrom also acknowledged in the interview the privileged position he and Instagram co-founder Mike Krieger find themselves in regarding the failure of SVB and its impact on their new venture.
“There are other companies with the exact same percentage locked in that not only need to pay payroll, but they have all these bills – and people don’t just have that money lying around. You can’t just distribute it,” Systrom said.
Yet, like many other entrepreneurs, the founder had been caught off guard by the bank’s meltdown, noting that while you expect there to be plenty of challenges when starting a new business, losing access to your funds is “last on the list of your expectations.
He also suggested that the problem with the bank may have had to do with the herd mentality in Silicon Valley, adding that there was no conscious decision on his part to work with SVB in the first place.
“As you find out in Silicon Valley – whether it’s wealth managers, accountants or lawyers – there’s this herd mentality and no one really questions why they’re using the service they’re using. . If you’re an entrepreneur, one of my lessons is to “ask why”: do your due diligence. And I think that’s important because you never really know what you’re getting into. But there are a lot of things like, oh, such a company uses X, Y or Z, we should use them,” he said. “And that creates long-term problems.”
He further warned that the banking crisis was just a hint of “bad things” to come for Silicon Valley’s tech ecosystem, noting how each crisis was precipitated by rising rates. And with the failure of a bank, there could have been cascading effects – for example, when one company cannot pay another, there is potential for fallout.
“My feeling is that whenever there are good times, you should be really worried in Silicon Valley,” like “whenever companies you know are dumb ideas raising tens of millions of dollars; when people throw excessive parties,” he said.
Systrom himself was just old enough to have watched the other boom and bust cycles in the Valley from a distance – in 2000 he was fresh out of high school and in 2008 he was fresh out of college.
“I saw the two crises from afar. And the patterns repeat over and over again. But what you realize is that no one gives a fuck. Because as long as you make money riding it’s like musical chairs – if you can just find a seat before it all falls apart, you make a lot of money and you’re off and you’re happy” Systrom said, “But it turns out there are a lot of people without seats at the end. And I think that’s overwhelming for the Bay Area, in general, which already faces a huge wealth disparity.” .
“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 5 or 4% of the bad things to come,” he said. added.
The wide-ranging 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 happening with Instagram today. hui and his approach to Artifact as an entrepreneur for the second time. – where he should have learned and adapted from any missteps of building Instagram, among other things.
About the latter, he explained that the tech industry is very different now than it was when he launched Instagram.
“I think the era of technology being able to do whatever it wants is long gone, hopefully, because it’s important for people to think about the implications of what their business will do before it gets to that point” , Systrom said.
He also noted that while he believed in the basics of Web3 and cryptography, he saw too much hype, people losing money, and people manipulating the consumer.
“I think that’s why the technology has a bad reputation,” he said.
On Instagram, Systrom lamented, “we’ve lost the soul of what made Instagram Instagram.”
“Before, I could go on and see what my friends were doing and see what my family was doing. I think the problem is that the incentives are always going to more sales reps, more creators, more offers, more advertising dollars.
As for Twitter, meanwhile, Systrom believes the jury is still out.
“You don’t know if chaos will be positive chaos…sometimes chaos breeds creativity, new products and new ways of thinking.” But, he added, not everything that happens on Twitter will benefit Artifact because they are very different products.
He has also publicly stated that he is against a total ban on TikTok in the United States, but said it deserves careful consideration. After all, China doesn’t allow our social networks, like Facebook and Instagram.
“I don’t think it’s crazy to say that we should be looking at it very closely,” Systrom said of the ByteDance-owned video app. “I don’t think we should ban it. But I think we should figure out how to handle it independently in the United States. I think it’s a really smart plan.