Tech is having a reckoning. Tech investors? Not so much.

On January 10, Charlie O’Donnell, a startup investor who runs Brooklyn Bridge Ventures, published a blog post that he hoped would inspire self-reflection among his peers in the industry. Provocatively titled Seed Investments in Insurrection, his argument was that venture capitalists needed to wrestle with their impact on democracy. 

“It’s kind of hard to make money if the long-term consequences of your investments threaten the free and open democracy that underpins our society,” he wrote, “an extreme statement—until this past week,” when “domestic terrorists, at least in part radicalized on one-time venture capital backed platforms like Facebook, YouTube, Twitch and Twitter stormed the US Capitol building.” 

The events in Washington forced technology companies to face a public reckoning over their role in promoting and amplifying extreme content. For years, critics called for social media platforms to enforce their own policies on hate speech, harassment, and incitement to violence, but the companies largely resisted. In the wake of the attack on the Capitol, however, they began taking action. Facebook and Instagram disabled Trump’s ability to post until after the inauguration, Twitter banned the president as well as 70,000 QAnon-related accounts, and YouTube prevented Trump’s account from posting for seven days.

Newer spaces, too, had more attention paid to them—especially those which have capitalized on the moment, from explicitly right wing spaces like Parler and Gab, which have subsequently been censured by Apple and Amazon, to the encrypted messaging app Telegram, which has seen millions of users sign up in recent weeks

But, as O’Donnell points out, one critical part of the technology industry has remained silent: the people who fund these companies. “I think the preference of most people is to stay out of things if they seem controversial,” he says.

“They wrote a check and moved on”

“Right now, they want to keep a low profile,” says Roger McNamee, who was one of the earliest investors in Facebook but has since become one of social media’s most vocal critics. “Many of them are associated with these platforms that are causing all the trouble, and they don’t want anybody to make that connection.”

Mitch Kapor, an early software entrepreneur turned investor, has long been outspoken about the role investors must play in acting responsibly and holding companies to account. He and his wife, venture capitalist and impact investor Freada Kapor Klein, were among the earliest to put money into Uber—but openly criticized the company in 2017 after sexual harassment claims by former employee Susan Fowler. 

“They put out a statement, they wrote a check, and they moved on, without changing how they do business”

Freada Kapor Klein

For years, the duo has called on fellow VCs to do better, and there have been moments of reckoning, including in the aftermath of the killing of George Floyd last summer. At best, however, investors’ actions have been “externally facing,” says Kapor Klein. “They put out a statement, they wrote a check, and they moved on, without changing how they do business.” (On the other end of the spectrum, some VCs echoed Donald Trump’s “few bad apples” ambivalence about white supremacist groups like the Proud Boys, while others applauded cryptocurrency company Coinbase’s decision to ban discussions of racial equity and politics from the office completely.)

But even the minimal level of self-reflection from last summer, Kapor Klein adds, has been largely missing since January 6. (The National Venture Capital Association put out a statement on January 7 condemning the “domestic terrorist attacks” but public positions from firms and individual investors, who have more influence on startup culture, have been extremely rare.) 

For Mitch Kapor, today’s investors—who typically sit on the boards of these companies and are meant to guide their strategies—are trying to avoid being held responsible. 

“They just retreat into silence,” he says. “They don’t want to admit that they’ve created a disaster that they bear responsibility for.” 

In fact, according to corporate development adviser Arjun Gupta, VCs are more concerned with the optics of being drawn into the political fight. Most of them, he says, feel uneasy about the suggestion that investors should have any say on the politics of the companies in their portfolio—or of the user bases that they court.

He has had multiple conversations with venture capitalists on behalf of his clients since January 6, and says that some VCs are discussing pulling investments as a “risk mitigation strategy.” Rather than concern over the impact of the platforms they fund, he suggests they are afraid of “pressure from their staff” or the institutional investors whose money is managed by VCs to take action. Their aim is to avoid getting “sucked into this shitstorm … of political discourse.”

Some participants say that conversations about accountability are happening in private, including on Clubhouse, the audio-based social network that is popular among Silicon Valley investors and has also faced criticism for its slow response to its harassment problems. (O’Donnell’s Brooklyn Bridge Ventures is an investor in Clubhouse.)

But critics who call for actions such as deplatforming extremist content say they are not asking for companies to police political views, but rather, take action when those views are expressed in hate speech and incitements to violence—and to ensure that companies develop and apply content moderation policies. So why are investors so reticent to hold their companies to account?

“We are a catalyst of this”

While their users might be on the fringe of the political spectrum, many “alt tech companies” are not outsiders in the technology industry. Most are embedded in the Silicon Valley startup and fundraising system that often puts the potential for growth higher than utility or need. Services like Gab, MeWe, Minds, DLive, and Clouthub— which have been slow or unwilling to remove hate speech, conspiracy theories, and threats of violence, sometimes in violation of their own terms of service—have all received money as part of the pipeline of incubators, crowdfunders, angel investors, fundraising, and acquisitions. 

They have also been indirect beneficiaries of the insurrection at the Capitol, with spikes in users as a result of the mainstream services’ deplatforming President Trump, his surrogates, and accounts promoting the QAnon conspiracy.

In a few cases, public pressure has forced action. DLive, a cryptocurrency-based video streaming site, which was acquired by BitTorrent’s Tron Foundation in October 2020, suspended or permanently banned accounts, channels, and individual broadcasts after the Southern Poverty Law Center identified those that livestreamed the attack from inside the Capitol building.

Neither Tron Foundation, which owns DLive, nor Medici Ventures, the Overstock subsidiary that invested in Minds, responded to requests for comment. 

EvoNexus, a Southern California-based tech incubator that helped fund the self-described “non-biased” social network CloutHub, forwarded our request for comment to CloutHub’s PR team, who denied that its platform was used in the planning of the insurrection. They said that a group started on the platform and promoted by founder Jeff Brain was merely for organizing ride sharing to the Trump rally on January 6. The group, it said, “was for peaceful activities only and asked that members report anyone talking about violence.”  

But there’s a fine line between speech and action, says Margaret O’Mara, a historian at the University of Washington who studies the intersection between technology and politics. When, as a platform “you decide you’re not going to take sides, and you’re going to be an unfettered platform for free speech,” and then people “saying horrible things” is “resulting in action,” then platforms need to reckon with the fact that “we are a catalyst of this, we are becoming an organizing platform for this.” 

“Maybe you wouldn’t get dealflow”

For the most part, says O’Donnell, investors are worried that expressing an opinion about those companies might limit their ability to make deals, and therefore make money.

Even venture capital firms “have to depend on pools of money elsewhere in the ecosystem,” he says. “The worry was that maybe you wouldn’t get dealflow,” or that you’d be labeled as “difficult to work with or, you know, picking off somebody who might do the next round of your company.” 

Despite this, however, O’Donnell says he does not believe that investors should completely avoid “alt tech.” Tech investors like disruption, he explains, and they see in alt tech the potential to “break up the monoliths.” 

“Could that same technology be used for coordinating among people in doing bad stuff? Yeah, it’s possible, just in the same way that people use phones to commit crimes,” he says, adding that this issue can be resolved by having the right rules and procedures in place. 

“There’s some alternative tech whose DNA is about decentralization, and there’s some alt-tech whose DNA is about a political perspective,” he says. He does not consider Gab, for example, to be a decentralized platform, but rather “a central hosting hub for people who otherwise violate the terms of service of other platforms.”

“It’s going to be pissing in the wind… because that guy over there is going to be in.”

Charlie O’Donnell

“The internet is decentralized, right? But we have means for creating databases of bad actors, when it comes to spam, when it comes to denial of service attacks,” he says, suggesting the same could be true of bad actors on alt tech platforms. 

But overlooking the more dangerous sides of these communications platforms, and how their design often facilitates dangerous behavior is a mistake, says O’Mara. “It’s a kind of escapism that runs through the response that powerful people in tech … have, which is just, if we have alternative technologies, if we just have a decentralized internet, if we just have Bitcoin” … then everything will be better.

She calls this position “idealistic” but “very unrealistic,” and a reflection of “a deeply rooted piece of Silicon Valley culture. It goes all the way back to, ‘We don’t like the world as it is, so we’re gonna build this alternative platform on which to revise social relationships.’” 

The problem, O’Mara adds, is that these solutions are “very technology driven” and “chiefly promulgated by pretty privileged people that … have a hard time … [imagining] a lot of the social politics. So there’s not a real reckoning with structural inequality or other systems that need to be changed.”

How to have “a transformational effect”

Some believe that tech investors could shift what kind of companies get built, if they chose to. 

“If venture capitalists committed to not investing in predatory business models that incite violence, that would have a transformational effect,” says McNamee.

At an individual level, they could ask better questions even before investing, says O’Donnell, including avoiding companies without content policies, or requesting that companies create them before a VC signs on.

Once invested, O’Donnell adds that investors can also sell their shares, including at a loss, if they truly wanted to take a stand. But he recognizes the tall order that this would represent—after all, it’s highly likely that a high-growth startup will simply find a different source of money to step in to the space that a principled investor just vacated. “It’s going to be pissing in the wind,” he says, “Because that guy over there is going to be in.”

In other words, a real reckoning among VCs would require a reorientation of how Silicon Valley thinks, and right now it is still focused on “one, and only one, metric that matters, and that’s financial return,” says Freada Kapor Klein.

If funders changed their investment strategies—to put in moral clauses against companies that profit from extremism, for example, as O’Donnell suggested—the impact that this would have on what startup founders chase would be enormous, says O’Mara. “People follow the money,” she says, but “it’s not just money, it’s mentorship, it’s how you build a company, it’s this whole set of principles about what success looks like.” 

“It would have been great if VCs who pride themselves on risk-taking and innovation and disruption … led the way,” concludes Kapor Klein. “But this tsunami is coming. And they will have to change.”