TAIPEI (Taiwan News) — In response to the market downturn and a string of bank failures, a Taipei-based venture capitalist suggested that startups could reduce operation costs by adopting smart technologies in the face of headwinds.
Known for building data-driven solutions and a global expansion strategy for startup companies eyeing the SE Asia and the U.S. markets, Brandon Chiang (江旻峻), Founder and Managing Partner of Addin Ventures (富旌創業投資), recently spoke to Silicon Valley-based Uly Su (蘇祐立) at the Startup Island TAIWAN Podcast show. He shared his thoughts a month after the collapse of the Silicon Valley Bank (SVB), which was said to be the biggest U.S. bank failure since 2008, and about the impact on cash-strapped startups.
Chiang described SVB as a slightly non-typical commercial bank, from which many startups backed by venture capital firms, despite the absence of hard assets as collateral, had received venture debt to finance their operations. The business model of blending traditional lending with entrepreneurial funding made it stand out during the tech boom with significant capital gains.
Startups benefited from the service and that helped SVB to stay ahead of the game as the network effect took place, developing a unique ecosystem that attracted both entrepreneurs and investors, good returns along with a lower transaction cost upon scaling up, Chiang said.
However, he said, the failure to continue to secure capital gains during the market downturn as well as the monetary policy change, to raise capital to offset the loss, and to retain depositors during a panic eventually led to its liquidity crisis and the collapse.
The incident highlights the risk that many banks have in their investment portfolios, especially government bonds. However, Chiang doesn't think it will become a systemic crisis as the U.S. authorities have learned from history and will proactively act to prevent a banking panic and another financial contagion seen in 2008.
In the face of multiple crises and funding challenges, Chiang recommended startups to reduce their operation costs by making good use of generative artificial intelligence technology to optimize workflows and improve productivity.
