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Artifact, the new personalized news app from the founders of Instagram, is another startup whose funding has been caught up in the collapse of Silicon Valley banks, and co-founder Kevin Systrom believes there could be more trouble to come for Silicon Valley. In a recent interview, the founder announced that the group had 100% of the Artifix Fund in SVB before the bank’s collapse. But, unlike many startups hit by the banking crisis, Artifact’s co-founders were in the fortunate position of being able to self-fund their startup if needed, and planned to take care of the company’s finances.
As it turned out, Artifact’s financial problems were short-lived. Systrom tells us that after the government took over SVB, Artifact got all the money back and had no further problems on that front.
The founders previously shared Artifact’s SVB exposure during a conversation with journalist Kara Swisher at SXSW, which was published for her “On With Kara Swisher” podcast.
When asked about artifact exposure, Systrom asked, “What’s 1% higher than 99%?” He responded that, yes, 100% of Artifact’s funds are now locked up in a failed bank under the supervision of a federal regulator. But Artifix could have moved forward because it was still small — just seven people — and its co-founders had “enough personal liquidity” to figure out how to borrow the company’s money, he said.
Systrom acknowledged in the interview that he and Instagram co-founder Mike Krieger are on good terms regarding the SVB failure and its impact on their new venture.
Not only do they have to meet payroll, but they have all these bills – and people don’t just have this money around, there are other companies that need exactly the same percentage. You can’t just go out and take it out,” Systrom said.
Still, like many other entrepreneurs, the founder was caught off guard by the bank’s failure, although he thought there would be many problems when starting a new company, losing access to your money “at the end of your waiting list.”
He also suggested that the bank’s problems may be linked to the herd mentality in Silicon Valley, where there was no conscious decision to work with SVB in the first place.
“As you know in Silicon Valley — whether it’s wealth managers or accountants or lawyers — there’s this herd mentality and nobody asks why they’re using any service. If you’re an entrepreneur, one of my lessons is ‘ask why’ — do some due diligence. And because you don’t know exactly what you’re getting into.” I think that’s important. But there’s a lot of, oh, so-and-so company uses X, Y or Z, we should use them,” he said. “And that creates problems in the long run.”
He warned that the banking crisis was just a hint of “bad things” to come for Silicon Valley’s tech ecosystem. And with a bank failure, there could have been widespread effects – for example, when one company couldn’t pay another, there could have been a failure.
“My thinking is that when times are good, you should think about it in Silicon Valley,” such as “when unknown companies are raising tens of millions of dollars.” When people throw excessive parties,” he said.
Systrom himself was still old enough to watch other boom-and-bust cycles in the valley from afar – In 2000, he was graduating from high school, and in 2008, he was graduating from college.
“I saw both crises from afar. And the patterns are repeated again and again. But what you realize is that no one gives. Because it’s like musical chairs as far as making money on the road – if you get a seat before everything goes wrong, you’ll make a lot of money and you’ll go away and be happy. he said. “But it changed. There are a lot of people who don’t have seats at that end. And I think that’s crushing the Bay Area, which is generally dealing with huge wealth disparities.
“My point is, the writing was pretty clear on the wall – bad things are going to happen… I think the SVB thing is about 5 or 4 percent of the bad things to come,” he added.
Image Credits: Artificial
The wide-ranging interview 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 on Instagram today, and his approach to Artifact as a second-time entrepreneur. – Missteps from building Instagram learned from other things and expected to adapt.
On the latter, he reflected that the tech industry is very different now than it was when Instagram started.
“I think it’s long overdue for technology to be able to do whatever it wants, hopefully, because it’s important for people to think about the implications of what their company is going to do before they get there,” Systrom said.
He also stated that while believing the information under Web3 and crypto, he saw too much hype, people losing money and people taking advantage of the consumer.
“I think that’s why technology gets a bad rap,” he said.
“We’ve lost the soul that made Instagram Instagram,” Systrom lamented on Instagram.
“Before, I could see what my friends were doing and see what my family was doing. I think the problem is always going to more business, more creators, more offers, more advertising dollar incentives.
As for Twitter, meanwhile, Systrom believes the jury is still out.
“It’s not clear whether chaos is positive chaos or not… Sometimes chaos creates innovation and new products and new ways of thinking. But anything done on Twitter won’t work for Artifacts because they are very different products, he added.
He went on the record against banning Tik Tok outright in the United States, but said it deserves scrutiny. After all, China doesn’t allow our social networking sites like Facebook and Instagram.
“I don’t think it’s crazy to say let’s take a closer look,” Systrom said of the Bytedance-owned video app. “I don’t think we should ban it. But I think we have to think about how we can govern independently in the United States. I think that’s a very smart plan.
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