Silicon Valley Bank collapse is a reminder that tech needs to fix its diversity problem

Since last year, the tech industry has laid off over 150,000 workers , disrupted communities , put vulnerable lives in limbo , and upended diversity and inclusion efforts . This past week, the chaos continued as two tech-related banks — Silicon Valley Bank (SVB) , the financial institution of choice for VC-funded tech startups and the crypto-friendly Signature bank collapsed raising serious concerns about another economic meltdown. The timeline for SVB implosion shows industry insiders panicked and jumped ship while others followed suit . VCs who previously lobbied against “big government” flooded social media with hysterical pleas for the government to bail out the uninsured depositors . It’s not entirely surprising that an insular industry that views societal problems primarily through the self-serving lens of technology and politics, completely missed the basics of financial risk management . One doesn’t need a degree in computer science to understand why putting all your financial eggs in one basket is a bad idea. It’s even more baffling when you consider that the men who shill decentralized web and DeFi (decentralized finance) as the future of tech, willingly parked funds in a single institution.

The tech VCs funded the speculative cryptocurrency boom, which was also unsurprisingly devoid of diversity and headlined by CEOs who shared their funder’s outdated views on social justice. When the market collapsed, the VCs scurried to hide their ape pictures and went back to their privileged lives, while Black investors bore the brunt of the losses. Companies that make public commitments to social change under public pressure, drop all pretense once the spotlight is off. In the aftermath of George Floyd’s murder, many companies pledged financial support for Black communities but most of it is yet to materialize . Demographic data on tech workforce since 2014 shows that the industry has made very little progress on improving diversity of their workforce. As Freada Kapor Klein, founding partner at Kapor Capital shared , “Every year they put out the same diversity report, check the box, then send out the same report the next year.” By reducing diversity to a check-the-box exercise and keeping it corralled in HR, the tech industry has diminished the value of diversity, deploying it either for PR value or as a scapegoat when things go wrong . Every attempt at diversifying the tech leadership has been watered down or decimated. A law designed to make corporate boards at California-based companies more inclusive and announced with great fanfare in 2020 was also struck down recently .

Matt Levine explained how the tech industry’s homogeneous base is plagued with groupthink and herd mentality, which brought down SVB, “if all of your depositors are startups with the same handful of venture capitalists on their boards, and all those venture capitalists are competing with each other to Add Value and Be Influencers and Do The Current Thing by calling all their portfolio companies to say “hey, did you hear, everyone’s taking money out of Silicon Valley Bank, you should too,” then all of your depositors will take their money out at the same time.” Tech companies are frantically trying to assure the markets that they are appropriately diversified but this diversification doesn’t include other critical dimensions of their business such as their workforce, boards, or customer base.

VCs claim that meritocracy is the cornerstone of their funding philosophy but data shows it is a rich boy’s club where many share the same elite alma mater s. When Theranos failed and its CEO Elizabeth Holmes went on trial for fraud, it impacted other women entrepreneurs’ ability to fundraise as they were constantly compared to the infamous founder. But when Sam Bankman-Fried, the CEO of FTX was arrested for running a multi-billionaire dollar scam , it didn’t make any difference to other male founders. In fact, Adam Neumann walked away a rich man after destroying WeWork and was still able to raise millions more from influential tech VCs . This double standard is par for the course in an industry that peddles innovation while clinging to the gender and racial norms of the ’60s. Over the years, the fawning tech media have provided cover for the predatory Effective Altruism cult whose powerful members prey on vulnerable young women .

Instead of taking responsibility for their role and pushing for accountability in the tech industry’s latest debacle, some lawmakers are blaming diversity to score political points. Feel-good allyship statements and token investments are not nearly enough for meaningful change and yet are too much for those who want to exclude folks who aren’t “one of them”. Research studies have shown us that diversity is good for innovation and founding teams with at least one minority founder yield better returns . And yet, Black founders received just 1% of all VC funds in 2022 and VC funding to women-led startups has dropped to less than 2% since 2021. Still, those determined to keep the status quo are blaming SVB’s diversity initiative for the bank failures even when a cursory look at SVB’s leadership team and board dispels any notion there were any meaningful attempts at racial or gender diversity.

We don’t need a business case to justify why the tech industry must more closely resemble the diversity of the world it operates in. We shouldn’t have to rationalize why the antiquated model of distributing risk to everyone and concentrating the wealth in the hands of a few is no longer acceptable. The recurring tech industry implosions have already made a compelling case for why diversity is good for all of humanity but it’s also good for business.

Mia Shah-Dand is the founder of Women in AI Ethics , a global organization advocating for more ethics and diversity in tech. She is an entrepreneur, speaker, and writer based in Brooklyn and Berkeley.?

You can read more of her thoughts below:

• Girlboss to Fascist Pipeline: It’s time for some real talk on diversity.
• Where is the accountability for techno-elite gatekeepers? ?