Opinion: Startups must focus on profitability over growth amidst collapse of big lenders

Both Credit Suisse and Silicon Valley Bank were active in the startup funding arena. Rob Rooney, CEO of HyperJar and ex-CEO of Morgan Stanley International, comments on the need for startups to become self-sustainable outside the lines of funding.

News of Silicon Valley Bank’s (SVB) collapse and UBS having to step in and rescue Credit Suisse has highlighted the pressure some of the biggest global lenders are coming under in the current economic climate.

These collapses serve as clear warning signals for startups, especially given that both banks in question were active in the startup funding arena.

Whilst this was known to be one of SVB’s areas of focus, Crunchbase data also reveals that Credit Suisse took part in at least seven venture or debt financing rounds for startups in the past year alone.

For too long the focus for early-stage tech firms has heavily centred around attracting investment and growth, however recent events have emphasised the need for tech startups to become financially mature and drive profitability without solely relying on institutional funding.

With worries from Wall Street surrounding which may be the next bank to topple, startups reliant on these players are likely to be concerned, forcing them to look to other avenues of security, as explained by Rob Rooney, CEO of HyperJar.

Having previously been instrumental in the post-Lehman restructuring era of Morgan Stanley, Rooney describes that fintechs have essentially become “techfins”, whereby a heavy reliance has been directed at the technological proposition instead of sourcing the right financial expertise to turn over a substantial profit.

By becoming self-sustainable in the most cost-effective manner, Rooney states that this is key in attracting investment and more importantly, surviving the potential downfall of the next major bank.