It’s back to basics, says U.S. bank chief

By Billy Chamberlin, The China Post

Despite rampant pessimism regarding the current economic situation, many opportunities exist for entrepreneurs and investors alike, according to the head of one of the United States’ top-rated banks. “Times are challenging but also optimistic,” said Kenneth Wilcox, president and CEO of Silicon Valley Bank, during his speech to the Taiwan Venture Capital Association yesterday in Taipei.

Wilcox said that the prevailing wisdom in the high-tech industry, with which Silicon Valley Bank does most of its business, is that a turnaround is near, thus the “buy low, sell high” theory can be clearly applied.

“We are returning to the basics. A few years ago, it was looked down upon if you wrote a business plan because it meant you were wasting time to market,” explained Wilcox. Today, he said, the traditional business model is back on track and is now being applied to the Internet and other high tech sectors. “People have skin in the game, again.” With management teams putting money into their own companies, along with venture capital, the firm’s managers are much more responsible, he said, in contrast to many scenarios during the height of the dot-com fever. However, many venture capitalists are still pessimistic regarding that current state of the IT sector, dampening their enthusiasm for investing, said Wilcox.

He noted that while US$19.3 billion was raised in venture capital fundraising during the second quarter of 2000, this year’s second quarter only saw around US$10 billion raised. Wilcox predicts that this number will probably level out at about US$8 billion a quarter, though he noted that this is significantly more than the US$9 billion a year that was raised in the early ’90s. For Taiwan, Wilcox said that biotechnology offers a lot of opportunity, including genomics and drug development. The central government has pledged to invest US$5 billion over the next ten years to help develop the domestic biotechnology. But many local investors are wary of the biotech sector, claiming Taiwan’s lack of experience makes investments high-risk. Alex Chang, investment manager with the Industrial Technology Investment Corp., who was also present at the luncheon, said that Taiwan should focus where it has comparable advantages, such as chip manufacturing. Answering this skepticism, Wilcox also said the telecom sector will provide tremendous opportunities in the future. “During the second half of the 2002, once all the excess inventories in the telecom industry have been burnt off, or become so obsolete they can just be discarded … then we will see new opportunities for the next three to four years.” However, no talk concerning investment remains complete without discussing the role/threat of mainland China’s opportunities. While Wilcox noted that his perspective of Taiwan investment in mainland China comes from an outside view, he did say that investment in the mainland is inevitable. Yet, one of the current obstacles for venture capitalists investing in companies aimed at the mainland is how to get their money out, he noted. This makes the mainland a tricky place to do business. Wilcox did say he predicts many American companies will invest in mainland China through Taiwan. “This is probably an important future role for Taiwan,” he said.