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Headlines across the media have been blaring about the SVB bank situation for the past few months. News channels, podcasts, and influencers who are in the know all chew on the same mainstream theme – how not to repeat the SVB’s crash course and keep your business and investors from similar risks in the future?
We’ve all witnessed a valuable lesson. But we need to analyze it properly if we want to draw any actionable conclusions from it. More importantly, we need to understand – are these conclusions enough to put at the core of serious decisions?
We can tell you right off the bat – the main lesson was indeed missed by many, as it may not be that obvious. But let’s start from the top.
Deemed a $209 billion tech lender, according to CrunchBase, SVB caused a crisis the likes of which we haven’t seen since the well-known situation of 2008. How exactly did it manage to achieve this unfortunate feat? There is no definite answer, but it isn’t something new to happen to a bank.
Whatever the core reason is, right now, it is more important to deal with the outcomes. SVB’s collapse set off a huge bandwagon where every other industry expert is eagerly reflecting on diversification of risks and investments, asset planning, choosing a reliable bank, and other relevant pains.
Yet that is only scratching the surface. What exactly should we learn from the situation? That we need to double down on risk management and long-term financial reliability – goes without saying. But we are missing an essential lesson.
It all comes down to this – investors are now watchful as never before. With such vivid examples of how the hugest financial institutions may easily crash, everybody gradually becomes more self-aware and seeks stability over everything else. This emerging pain point will seriously affect the future functioning and environment of startups.
Simply saying – it will become hard and challenging for startups to pitch their products and raise investments.
So, startups will need to find new ways to pitch. How? By adapting and finding approaches to investors based on the decisive points and levers spawned by the SVB’s crash. These factors now shape the way investors decide which projects are worthy of their attention in the first place.
Recent market crisis calls for more focus on:
- Efficiency of resource of management;
- Legal risks management;
- Circulating payroll maintenance;
- Overall financial flexibility.
A flexible financial stance is something startups have to reinforce all across the board. It is no longer a game of chance and loud promises, even for the most promising projects. This brings us to the main question and the most slept-on lesson coming out of the whole situation.
To stay dynamic and resilient financially, a business or startup needs all-around flexibility across major operational facets. This calls for the adoption of a fitting operational model that grants all of the above opportunities and streamlines financial security.
And this is where IT outsourcing makes a surprising comeback. In given circumstances partially caused by the notorious SVB, opting for project outsourcing is a wise and relevant decision that allows you to tap into international IT expertise and keep development expenses reasonable at the same time.
The best part – it provides exactly the strengths and capacities you need in order to put enough confidence in the investors shaken by potential hardships of total project bankruptcy.
In the aftermath of the SVB collapse outsourcing becomes an adaptive strategy for efficient resource management in two major ways:
a) It is ultimately cheaper to maintain due to the model’s on-demand nature and coverage of costs related to human resources, admin expenses, and workplace organization/management by third-party IT outsourcing companies. Offshore providers help to save up to 60% of overhead startup costs, helping to minimize risks in such situations.
b) All the saved money can be used to finance startup planning stages, hiring top-of-the-line experts to conduct analyses and assess the startup value at the highest level of quality, preciseness, and time/cost-efficiency (e.g., by pointing out the best approximate value of the discovery and business analysis stages). And this saves even more costs in the long run, as thorough planning is your best guarantee of pitfall-free workflows.
Adopting outsourcing, startups get a reliable option to respond to risks promptly and terminate collaborations without huge legal issues and expenses. It can be useful and life-saving when partnering up with an unreliable company or entrepreneur that decides to drop a project in the middle of it.
In such cases, outsourcing IT services is a fast way to fill the gap and keep driving the project no matter what. Whereas without this often lifesaver option – in-house layoffs, expensive compensations, and a heap of other underlying pains, issues, and expenses become inevitable. No need to look far – you got an upcoming payday and all of a sudden your funds become hostage to a drowning bank. No happy-end, no deposit insurance, an emergency break for your business, full-stop. Sounds a bit like a nightmare, isn’t it?
Ultimately, a good outsourcing foundation allows you to scale teams dynamically. While both laying off employees and adding new specialists to the team require whole projects of their own (recruitment workflows), the size, composition, and focus of an outsourced team are under your full control.
All said and done, as soon as you can flexibly and intricately manage, direct, and customize operational flows and related expenses, you achieve that much-desired financial resilience. Instead of covering tons of hidden costs without even noticing or wasting money just to keep afloat, you get to cut unnecessary expenditures in one place and double the budget in another.
After the SVB situation, a payroll freeze may as well be the biggest fear and potential pain of every startup. No surprises here – a blocked payroll usually means you are one step closer to the complete project bankruptcy. Being too reliant on a stable flow of the funds (from the seed rounds you count on) makes your business rigid and fragile, with no leeway. Just imagine all the possible legal wrangling with all the people you can’t provide with a “golden parachute” when everything goes south. Here, again, strategic outsourcing comes in as a very flexible approach, being also simpler to manage in terms of legal aspects.
For one thing, if you experience project-threatening issues of any kind, you won’t have to deal with all the legal bindings that you have established so far, which may include lay-offs across departments, investor compensations, untimely rental or licensing deals breaking, etc. All these project or team “farewell” processes take months of time and heaps of money to settle.
So tons of legal headaches are saved for both you as a startup owner/manager and your partners when you have dynamic outsourcing options. In a perfect scenario where you work with one reliable offshore provider, you are bonded by a single regular service agreement, which you may discuss and adjust with your trusty partner.
To avoid going bankrupt, you are free to stall certain stages and revise workflows without any extra issues. Such “outsourcing freedom” also helps focus on securing new necessary costs at the right point in the project timeline.
All in all, you get exactly what you pay for.