The collapse of Silicon Valley Bank, the second largest in US history, is raising concerns about a “contagion” that could trigger a financial panic. As the 18th largest bank in the US, SVB’s bankruptcy may not prove an event on the scale of Lehman Brothers, but it may reflect something perhaps even more important: the decline of the Valley’s once vibrant entrepreneurial culture. 

As a young reporter, I covered bank founder Roger Smith in 1983 when he came up with the idea of providing conventional financing to young, often venture-backed growth companies. In those days the big Wall Street financiers were largely clueless about technology, and the industry needed someone who understood their needs and ambitions. The now-retired Smith became a real player in the tech world, as well as in the Valley’s philanthropic scene.

Today’s Silicon Valley is not brimming as before with aggressive startups and the garage-based entrepreneurs who are the SVB’s bread and butter. Indeed, the magic that led firms and people to come to California is wearing off; Mike Malone, who has chronicled Silicon Valley over the past quarter-century, believes that this is because the Valley has lost its egalitarian ethos. The new masters of tech, he suggests, have shifted from “blue-collar kids to the children of privilege”. An intensely competitive industry, he adds, has become enamoured with the allure of “the sure thing” backed by massive capital. If there is a potential competitor they simply buy it. Innovation is therefore in short supply.