Venture-Backed Trumpism

Silicon Valley, strictly speaking, does not exist. Its geographic boundaries are fluid and contested; even the places considered central to it are oddly placeless. Driving through Menlo Park and Mountain View, you could be forgiven for thinking you were nowhere at all. What defines the Valley is something you can’t see: the velocity of the capital coursing through it. The region is home to more than $14 trillion worth of publicly traded companies, four of which are the largest on earth. It also includes some number of people who think Donald Trump should be the next president of the United States.

Trump has never been without admirers in the Northern California tech industry. But they appear to be more numerous in this election cycle. There is, of course, Elon Musk, who announced his endorsement within an hour of a bullet perforating the former president’s ear, posting a video to X of a fist-pumping Trump with blood on his face. “Last time America had a candidate this tough was Theodore Roosevelt,” he bubbled in a follow-up post. Trump, in turn, wants to offer Musk a job in his administration.

About a dozen other high-ranking figures from Silicon Valley have also declared their support. The venture capitalist and Palantir cofounder Joe Lonsdale has given $1 million to a Trump-allied super PAC, as has Sequoia Capital’s Doug Leone. Another Sequoia partner, Shaun Maguire, has contributed $300,000, while Marc Andreessen and Ben Horowitz, cofounders of the venture capital firm Andreessen Horowitz, have publicly promised to make a significant contribution. In June the venture capitalist David Sacks held a $300,000-a-plate fundraiser in his San Francisco home that brought in $12 million. Several other tech notables were in attendance, including the venture capitalist Shervin Pishevar and the crypto barons Tyler and Cameron Winklevoss.

Trump’s selection of the Ohio senator J.D. Vance as his running mate has thrilled his Valley backers. Vance has long-standing ties to tech thanks to his friendship with the venture capitalist Peter Thiel, who helped him break into the industry as a recent Yale Law graduate. Vance lived in the Bay Area from 2015 to 2017, working first as a biotech executive and then at Mithril Capital, a venture firm that Thiel cofounded. Vance cofounded his own venture firm in Cincinnati in 2020, shortly before embarking on a political career in which his Valley connections proved indispensable. Thiel contributed $15 million to Vance’s 2022 Senate run; Sacks gave $1 million. More recently, these men (and they are all men), together with Musk, lobbied Trump to add Vance to the ticket. “WE HAVE A FORMER TECH VC IN THE WHITE HOUSE GREATEST COUNTRY ON EARTH BABY,” Delian Asparouhov, another Thiel-linked venture capitalist, hollered on X after the announcement.

Media coverage of the Trump-Vance-Valley nexus has been extensive and, at times, hyperbolic. The Washington Post speaks of a “Silicon Valley realignment.” According to The Nation, “Silicon Valley has been fully MAGA-pilled.” Not exactly: by the numbers, the region remains thoroughly Democratic. Santa Clara County, a decent if imperfect proxy for Silicon Valley, has no Republican elected officials at the county, state, or federal levels. In 2020 Biden won the county with more than 72 percent of the vote. Moreover, a number of tech executives and investors are major Democratic funders: before Biden withdrew from the race, Yahoo reported that eight of his campaign’s top twenty contributors came from Silicon Valley. The elevation of Oakland-born vice-president Kamala Harris, who has cultivated relationships with tech since she began her political career as San Francisco’s district attorney, has further energized the industry’s donor networks. All available evidence suggests that Trumpism remains a minority tendency within the tech patriciate.

Still, there is no doubt that right-wing ideas have found a wider audience among tech elites during Biden’s presidency, as exemplified by Musk. A few of Trumpism’s current adherents in the Valley do have a history in conservative politics—Sacks and Andreessen backed Mitt Romney in 2012, and Leone is a longtime Republican donor—but most of them opposed Trump in the past. Others could be described as ex-Democrats, or at least people whose loyalties used to lie mostly with the Democratic Party. There have been some stark reversals. In 2016 the venture capitalist Chamath Palihapitiya declared that he would “absolutely” kick somebody off his board for donating to Trump. In June of this year, he sat next to the former president at Sacks’s San Francisco fundraiser and led an informal poll about who Trump should choose as his running mate. (Everybody agreed: pick Vance.)

How to explain this shift? Up close, any individual’s politics can be quite strange: a ragged mix of concepts and convictions, selected from motley sources, held together with hearsay and anecdotes. That includes Silicon Valley’s Trumpists. But ideology never develops in a vacuum; it depends in large part on how people make their living. The theorist Stuart Hall described economic life as a “net of constraints” for people’s ideas about society—a sort of filter through which the material percolates into the ideological. For the Trumpists of Silicon Valley, this suggests that the nature of their livelihood may give us a clue as to the origins of their attitudes. As it happens, almost all of them make their living the same way. They are, in both vocation and outlook, venture capitalists.

An assemblage of dams, reservoirs, and aqueducts is required to turn California’s dry interior into farmland. Water is meticulously diverted so that billions of dollars of grapes can grow. Silicon Valley’s venture capitalists—working out of firms such as Andreessen Horowitz, with $43 billion under management, and Sequoia Capital, with more than $50 billion—believe they serve a similar function. They channel cash to deserving “disruptors” so that innovation can bloom.

It can be a fickle business. Venture capitalists make money for themselves and their “limited partners” (LPs)—pension funds, university endowments, wealthy families—by investing in start-ups. Most fail, but a winning bet on the next Google can generate extraordinary returns. Since LPs supply venture capital funds with the vast majority of their cash, they must be persuaded that the risk of committing money to such an enterprise is worth the potential reward.

In 2021 rock-bottom interest rates increased investors’ appetite for risk, helping US venture capital funds raise an unprecedented $128.3 billion, a nearly 50 percent increase from the previous year. In 2022 the sector smashed that record, raising $173 billion. Then, in 2023, fundraising fell off a cliff, dropping 60 percent. So far, 2024 is on pace to be another bad year.

One culprit is rising interest rates. Another is that there are fewer “exits,” or opportunities for venture capitalists to sell their equity stake when a start-up goes public or is acquired. The weak market for initial public offerings (IPOs)—the first shares sold when a company goes public—means that tech companies are taking longer to go public, if they do so at all. Meanwhile, mergers and acquisitions (M&A) in tech have hit a multiyear low.

Big firms like Meta and Alphabet are focused on efficiency and cost savings, which means they aren’t snapping up start-ups like they used to. At the same time the Biden administration’s spirited approach to antitrust enforcement is putting a damper on dealmaking. This has produced what the journalist Dan Primack calls a “liquidity drought”: without exits, LPs can’t get their cash out of the fund. In response, venture capitalists are scrambling to come up with ways to return money to LPs, such as selling their shares in start-ups to other investors through the so-called secondary market.

The boom in generative AI, which has seen start-ups attract billions of dollars in investment in the hope of advancing (and commercializing) the technology popularized by ChatGPT, has provided some respite, but not nearly enough. Because generative AI requires large concentrations of computing power, start-ups can’t compete directly with the big tech companies. Instead they are forced into licensing deals and other kinds of partnerships, which sharply limit the returns available to their investors. For venture capitalists, it may feel as though the universe is conspiring against them: at the same time that macroeconomic conditions are making it harder for them to raise or return money, the hot technology of the day favors the corporate incumbents. The largest venture fortunes in history were made from the mid-1990s to the mid-2010s, when a farsighted or merely fortunate venture capitalist could earn colossal sums by backing successful Internet companies like eBay and Facebook. Today, the routes to such lucre appear fewer and farther between.

If economic conditions are becoming less hospitable for venture capitalists looking to multiply money, the political environment presents challenges as well. Trump’s Silicon Valley backers are outraged at several steps taken by Biden, who has wielded the regulatory powers of his office more eagerly than they expected.

The first challenge concerns crypto. The Biden-appointed chair of the Securities Exchange Commission, Gary Gensler, has taken the view that most digital currencies are securities, and therefore that the companies trafficking in them are subject to securities law. He has been particularly vigorous in using rulemaking and litigation to tame the sector. This has infuriated crypto devotees, who are well represented within the Silicon Valley Trumpist set, among them Andreessen, Horowitz, and the Winklevoss brothers.

A second, related issue is AI regulation. Here the Biden administration has been more tentative, issuing an executive order in October 2023 that instructs federal agencies to undertake various initiatives aimed at ensuring the “responsible” use of AI. Much of the measure directs officials to draw up guidelines, conduct studies, and establish task forces. But it does contain a mandate for the private sector. Invoking the Truman-era Defense Production Act, the executive order compels tech companies developing large AI models to share certain information with the federal government, including the results of the safety tests they run to identify possible dangers such as cybersecurity vulnerabilities or “the use of software or tools to influence real or virtual events.” Venture capitalists worry that such regulation may make the AI market even harder to navigate as investors. “If there’s a reign of terror from the government for AI the way there has been for blockchain, the country is in profound trouble,” Andreessen fretted in July on the episode of his and Horowitz’s podcast, The Ben and Marc Show, in which they endorsed Trump.

The two men are also distressed by what they see as Biden’s favoritism toward the big tech companies. AI regulation will further fortify large firms like Microsoft, they believe, by introducing compliance requirements that start-ups can’t possibly satisfy. “They’re going to basically destroy the start-up ecosystem,” says Andreessen. “They’re going to enshrine essentially an OPEC of AI.”

Yet venture capital’s relationship to bigness is more complex than these lines imply. One way to get rich as a venture capitalist is to make a bet on the next Google, but another way is to make a bet on a company that gets acquired by Google for a lot of money. In the first case you want a market that is porous enough to let a newcomer become an incumbent. In the second case you want incumbents that are large enough to be able to pay well for your start-up—but not so large that they never feel the need to shop for new technology or co-opt up-and-coming competitors. In 2014 Facebook paid $22 billion for WhatsApp, one of the priciest acquisitions of a venture-backed start-up ever. The goal, as the journalist Henry Blodget wrote at the time, was “to both own ‘the next Facebook’ and prevent ‘the next Facebook’ from eating Facebook’s lunch.”

This discordant set of motivations accounts for a certain ambivalence among the Silicon Valley Trumpists toward antitrust policy, an area in which the Biden administration has sought to distinguish itself. Andreessen, for his part, attacks the White House for favoring large firms while complaining that regulators are blocking those very same firms from acquiring start-ups. This is not hypocrisy, exactly: it is a contradiction rooted in contradictory interests.

What would Trump do as president? In courting Silicon Valley, he has made several promises. For one, he has embraced crypto, vowing to fire Gensler and put an end to the “persecution” of the industry. He also wants to reverse Biden’s AI rules. The GOP platform puts it nicely: “We will repeal Joe Biden’s dangerous Executive Order that hinders AI Innovation, and imposes Radical Leftwing ideas on the development of this technology.”

As for antitrust, the outlook is less clear. Vance has expressed support for Lina Khan, Biden’s energetic FTC chair, and called for the breakup of Google because it is, he believes, “an explicitly progressive technology company.” Still, it’s hard to believe that a Republican administration would do much to constrain corporate power—though it might try to punish certain tech monopolies that are perceived as political enemies. Vance has been particularly exercised about the supposed liberal bias in Google search results, as well as by the fact that the company’s AI image generator has been known to spontaneously produce such “woke” abominations as pictures of a woman pope or a Black Viking.

But the government isn’t just a regulator; it is also a customer. This is another basis for Trump’s support within Silicon Valley: the belief that his administration would hand more government contracts to venture-backed businesses. Vance is expected to be especially useful in this regard, given his links to Thiel and other Valley personalities.

Thiel was Trump’s most prominent tech patron in 2016, though he has not donated to the current campaign. (The former president’s administration was “crazier” and “more dangerous” than Thiel expected, he told The Atlantic last year.) More broadly, he remains the godfather of the Silicon Valley right. The German-born investor is especially adept at nurturing relationships with younger men who share his taste for reactionary authoritarianism and promoting their careers in politics and tech. He is also a central node in a web of defense and intelligence start-ups that stand to profit from a second Trump term.

The best known is Palantir, the data analytics company Thiel cofounded, whose software is popular with the Pentagon and many other organs of the security state. (One of his cofounders is the Trump booster Joe Lonsdale.) Another company in the Thiel network is Anduril, cofounded by Trump stalwart Palmer Luckey, which specializes in autonomous defense systems. Thiel’s Founders Fund, along with Andreessen Horowitz and Lonsdale’s venture firm 8VC, are all investors, and Vance also holds shares in the company. Then there is Scale AI, a Thiel-funded start-up that sells AI services to the military. It enjoys a particularly strong tie to Trumpworld: the managing director, Michael Kratsios, is a Thiel protégé who worked for the Trump White House as its chief technology adviser.

These firms have benefited from the booming arms trade initiated by Russia’s invasion of Ukraine. The war has also spotlighted the value of drones, which the Ukrainians have used to great effect in leveling the playing field against a better-equipped enemy. The rest of the world is paying attention: militaries around the globe are investing heavily in unmanned technologies. This has created an opening for smaller contractors, who tend to be more adept at building data-intensive, software-driven weapons systems than the larger corporations that have traditionally dominated the war business. According to PitchBook, a financial research firm, a record 356 aerospace and defense companies raised venture capital funding last year, securing a total of $7.17 billion.

Aside from accelerating this trend, Trump may also devote more resources to developing military AI: The Washington Post recently reported that the former president’s allies are drafting an executive order that would inaugurate a series of “Manhattan Projects” toward that end. As always China is the motivating obsession. When Trump met with Andreessen and Horowitz for a three-hour dinner, he reportedly told them, “AI is very scary, but we absolutely have to win. Because if we don’t win then China wins, and that’s a very bad world.” The Heritage Foundation’s Project 2025, a blueprint for a second Trump term, speaks gravely of Chinese advancements in AI and calls for “unified action to counter them.”

A further path to public money lies in immigration enforcement. For years ICE has used custom-built software developed by Palantir to store, access, and analyze data about individuals suspected of immigration violations. These tools help agents identify people to capture and deport. Anduril, meanwhile, is deploying nearly two hundred of its AI-powered surveillance towers to the US–Mexico border. If elected, Trump promises to militarize the border to an even greater extreme, as well as to undertake mass deportations. Coordinating the logistics involved would likely create more contracting opportunities for venture-backed start-ups.

To some venture capitalists, these linkages between the public and private sectors augur a new future for the industry, one in which tech companies would partner with the state to strengthen its coercive capacities at home and abroad. This is a future with a strong resemblance to the past: in its early days as a semiconductor manufacturing zone, Silicon Valley relied on the Pentagon for nearly all its revenue. Nobody is nostalgic for quite that degree of dependency, but the venture capital wing of the military-industrial complex is keen to expand its footprint. Earlier this year Andreessen Horowitz launched its American Dynamism fund, which invests in companies “supporting the national interest.” It has poured money into a related lobbying effort, spending almost $1 million in 2023 alone. In a blog post, Andreessen and Horowitz describe the importance of defense contracting in world-historical terms: start-ups, as “the vanguard of American technological supremacy,” ensured US global domination in the twentieth century. “There is no reason the 21st Century cannot be a Second American Century,” they believe—provided the government directs its dollars to the right place.

Silicon Valley’s Trump backers are also worried about taxes. Modern venture capital is in large part a creature of the tax code: the sector only really took off in the 1980s, after Congress slashed the tax rate for capital gains by almost 50 percent in 1978. Silicon Valley played a decisive part in that development. Leading the effort was the American Electronics Association, a trade group founded back in the 1940s to lobby for government contracts. Its operatives testified on Capitol Hill, circulated white papers, and identified sympathetic representatives and senators to build bipartisan momentum behind the bill.

The next year Silicon Valley notched another victory by persuading the Department of Labor to loosen a rule that had kept institutional investors like pension funds and university endowments from committing money to venture capital on account of its higher risk. The lobbying breakthroughs of the late 1970s led to an influx of investment, catapulting venture capital into its Gordon Gekko era. In 1977 VC firms managed around $2.5 billion; by 1983 that number had grown almost fivefold, to $12 billion.

This history helps clarify the horror expressed by some venture capitalists at Biden’s plans to increase taxes on capital gains. While the specifics of the idea have changed over the years, the administration’s most recent budget proposal would impose a minimum income tax of 25 percent on households with wealth in excess of $100 million. Crucially, it would use an expanded definition of income that includes unrealized capital gains—that is, an appreciation in the value of unsold stocks, property, or other assets.

Currently, capital gains are taxed only when the underlying asset is sold. (If you hold it for less than a year, it’s taxed at the same rate as ordinary income; if you hold it for more than one year, it’s taxed at a more favorable lower rate.) In practice, this means that wealthier Americans can choose when they pay taxes—a luxury most people don’t enjoy. They can also shrink their tax burden by passing assets along to their children, who will be taxed only on the difference between the market value of the asset when it was inherited and its price when sold.

Biden’s Billionaire Minimum Income Tax, as he calls it, aims to reduce these advantages of capital ownership. Perhaps its most threatening aspect from the perspective of venture capitalists is that it would erode a central pillar of their power: their ability to determine how much a company is worth. Before a company goes public, its value is typically set by its investors. Venture capitalists generally have an interest in inflating that value, in the hopes of arranging a lucrative exit. In Biden’s proposal, however, the IRS would be the one that ultimately decides the valuation of “non-tradable” assets, such as equity in a start-up. This would put investors in a bind: inflating valuations may lead to a bigger payday, but it would also mean a greater tax liability.

All this is, at present, hypothetical: there is no chance that the Billionaire Minimum Income Tax will make it through Congress, much less the Supreme Court. And yet it still has Trump’s Silicon Valley supporters seething. Andreessen calls it “the final straw” that pushed him toward Trump. Horowitz sees it as Leninism. “When the Bolshevik Revolution happened, Lenin’s first idea was to kill all the rich people,” he muses. “But you run out of rich people pretty fast, it turns out. Particularly if you’re killing them.”

Silicon Valley is still trying to figure out what a Harris administration would entail for tech. The signals are mixed. On the one hand, she led the effort on the AI executive order as the White House’s “AI czar.” On the other hand, she has friendships with Silicon Valley executives and investors dating from the early 2000s. And nothing in her tenure as California’s attorney general or as a senator would indicate an appetite for taking on Silicon Valley.^*

Yet Harris, like any president, would be working under certain constraints. One of these is the politics of her party, which have moved to the left in recent years. During the 2020 primaries, tech magnates were united in their antipathy to Bernie Sanders. “Silicon Valley Leaders’ Plea to Democrats: Anyone but Sanders,” read a New York Times headline. Four years later, they find themselves living under a Democratic administration that has embraced much of the Sanders agenda. The hated wealth tax comes from Sanders and Elizabeth Warren, as do many of the ideas behind the Biden administration’s surprisingly progressive domestic agenda, which has included an expansion of the safety net, a regulatory push around antitrust and consumer protection, a meaningful if inadequate climate bill, and the most pro-labor National Labor Relations Board since the 1940s.

What upsets the Trumpists of Silicon Valley is not only the policy platform associated with this shift but, more broadly, the feeling that the Democrats have abandoned them. One of the factors behind Musk’s rightward turn was Biden’s failure to invite him to a White House summit of EV manufacturers in August 2021, reportedly because of Tesla’s notorious union busting. “The Democratic party I knew under Obama doesn’t exist anymore,” Shervin Pishevar told the Financial Times from the Republican National Convention. “One thing” that Obama had going for him, Horowitz has lamented, was that “he was always interested in what business had to say.”

The phrasing is telling: the injury lies in being ignored, in being denied the respectful attention that is their due. Obama, like Bill Clinton before him, didn’t just promote Silicon Valley’s interests. He worshiped tech. The Internet would ignite a new era of American dynamism, make the world a better place, democratize everything. Tech entrepreneurs were rock stars, savants. They were the advance guard of humanity, leading us into a glorious future.

This is the rhetoric that helped secure Silicon Valley’s allegiance to the Democrats in the first place. Back in the 1970s and 1980s, the region leaned Republican. “For all the hype around the countercultural personal-computer crowd,” observes the historian Margaret O’Mara, “Silicon Valley remained in the hands of patriotic midcentury men who’d grown rich in the Cold War economy.” These were men like David Packard, the Republican cofounder of Hewlett-Packard, who exerted considerable influence over the industry’s politics, and Ed Zschau, the tech entrepreneur who led the lobbying effort to lower the capital gains tax and then went on to represent Silicon Valley’s interests in Congress as a Republican in the 1980s.

Santa Clara County voted Republican in every presidential election from 1972 to 1984. Then, in 1988, Michael Dukakis won the county by a narrow margin. Dukakis owed his political profile to the high-tech boom then unfolding in his home state of Massachusetts. He was also an innovator of the pro-business centrism later perfected by Clinton, which helped him attract a voting bloc of affluent professionals, the so-called Atari Democrats. It would be this brand of politics that drew Silicon Valley into the Democratic camp during the 1990s. Driving this realignment was not just policy but flattery. Democratic politicians told tech they would govern for its benefit, and that tech’s beneficence would benefit everyone.

Democrats, for the most part, don’t talk like that anymore. The question is whether their diminished sycophancy, and the new left-liberal dispensation that has accompanied it, will endanger the party’s dominance within elite tech circles. “I personally am not thrilled by the direction [of the Democratic Party],” Alex Karp, Palantir cofounder and CEO, told the Financial Times, “but how far can they go before I reconsider?” Karp remains a Democrat, but his loyalty is conditional. If enough men of his rank feel that their standing within the party is slipping, and that the other side offers better advantages and endearments, more of them may follow the example of tech’s Trumpists and return the Silicon Valley leadership class to the Republican fold. After all, it is an industry organized around the idea that nothing lasts forever.