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Venture capital funding has always been a complex and highly competitive landscape where startups and established businesses alike vie fiercely for investor attention and financial backing. And in recent times, this state of things has only grown progressively worse.
Over the past two years, global markets have observed a continuous fall in venture capital funding. In Q1 2023, the figure reached $76 billion, less than half the amount recorded in 2022 ($162 billion). Funding into the fintech sector amounted to just $23 billion in the first half of 2023. At the same time, the number of funding rounds dropped by 64% compared to the same period in 2022.
The investor sentiment is waning, and to survive in this grim climate, startups must be capable of rapidly adapting to changes and possess a sensible MVP capable of attracting investors and customers alike. These are the foundation upon which a business is built and from which it can improve based on evolving customer needs and emerging market trends.
Let’s look at how companies can adapt their operations in a challenging environment where investors are becoming more cautious and their funding scarcer.
Adapt your startup to the realities of the BANI world
Before we get into the detailed recommendations on what parts of your business you should focus on when seeking investment opportunities, I believe it important to point your attention to a more overarching matter. Namely, the modern-day business landscape in which companies find themselves operating.
In today’s rapidly changing global environment, any startup founder must know the BANI world and understand its nuances and rules. BANI stands for “Brittle, Anxious, Non-Linear, and Incomprehensible,” representing the key characteristics of the current business environment.
Today’s world is prone to sudden disruptions and shocks that can significantly impact businesses and their activities. As such, leaders must learn to anticipate potential risks and build resilience within their organizations. To maintain an efficient business in times of uncertainty and volatility, leaders need to monitor market dynamics constantly, understand the ongoing trends and adapt their strategies accordingly.
In short, understanding the modern realities is essential for heads of startups to successfully steer their companies towards growth and secure investments from stakeholders who value adaptability and foresight. It is particularly important for startup founders, as such businesses already tend to start their journeys in a financially vulnerable position. Failing to acknowledge the aspects of the BANI world may leave them ill-prepared to face disruptions, competition, market shifts and other threats.
By taking care to keep an eye on these complexities, on the other hand, founders can make more informed decisions and adjust their business strategies accordingly. This can build their organizations more resiliently and attract investments by showcasing their ability to thrive in a rapidly changing and challenging environment.
Now that we have cleared up the BANI world issue, let’s take a closer look at the actions that startup founders can take when fundraising. Based on personal experience, I recommend focusing on three main aspects of your business when you’re planning to engage with promising investors.
1. Grow your revenue rather than your turnover
When the market is going through a boom, investors tend to look at how rapidly a company can grow and capture its share in the market. But in today’s business landscape, it is more important for them to understand that a company can endure and survive in harsh circumstances. And survive for a long time, at that. If you have the capacity to be profitable on top of that, then all the better for you.
Make sure to demonstrate this fact openly and proudly, as it would make a lot of sense for investors to invest in you to drive this success further and get their share of the profit from it.
2. Pay attention to your company’s data and analytics
Showcase figures that would indicate to investors that your business is viable and that they can invest in it safely. In my own company, for example, we demonstrated how much we managed to reduce costs while boosting revenue simultaneously. Things like that give investors the information that you can operate effectively, which worked to great effect for us.
3. Show that you can make responsible financial decisions
If investors are to put their money into your startup, it would put their minds at ease to know that you can invest said money competently and precisely. More specifically, under the current market conditions, pouring funds into things that yield a quick result is necessary. You are required to be able to adapt to market trends and make quick decisions that provide quantifiable outcomes.
Fundamentally, the most important thing is to demonstrate a set of skills and tools that would indicate to investors that your business can maintain itself regardless of the outside conditions in a market filled with uncertainty.
Data-driven decisions give businesses the power to grow
By staying updated on industry developments, customer preferences and the competitive landscape, businesses can identify opportunities and adapt their strategies to stay ahead of the curve. This requires strategic thinking, flexible problem-solving skills and a willingness to take calculated risks. It falls to the company leadership to monitor performance and make informed decisions that would enable their business to maintain a level of success attractive to investors.