Accessing funding in a downturn

Accessing funding in a downturn

Starting a business is a bit like building a ship. Craft, tenacity, and expertise are only half the battle. Unless you know when to schedule that all-important maiden voyage, you’re likely to sink.

Many founders look at market conditions when deciding whether it’s the “right” time to launch a new venture. It’s natural to see difficult markets as a signal to stall. However, it might be the best time to start, because working in difficult conditions forces you to focus on building an efficient, profitable business from the outset.

So what does it take to build a bullet-proof business that’s ready to enter the market no matter how stormy the seas?

A clear business model

Sound business models start with a clear value proposition that meets specific customer needs, but also shows potential investors a realistic path to profitability.

That means showcasing that the business has:

• Potential to scale at speed, allowing for increased output without equivalent cost rises, often through digital platforms.
• Diverse revenue streams from product sales, subscriptions, and licensing which can be an advantage.
• Customer acquisition and retention strategies in place, along with strong fiscal management, including budgeting and cash flow monitoring.
• Market traction and competitive advantage through technology, intellectual property, or expertise which will take your idea a long way towards success.
• Developed good fiscal habits.

A good example is AI startups, which attracted a third of all investment in the US last year¹. Despite their high computational costs, AI labs training large language models were among the few areas that saw substantial investment attention in 2023 largely due to their expected ability to drive economic growth and significantly improve productivity.

A dynamic leader

Strong business fundamentals are a good starting point, but securing funding also requires a clear strategy to help a bold founder realize their vision.

Someone with a blend of audacity and pragmatism, and the ability to dream big coupled with a grounded approach to running a business is going to make investors confident. On the other hand, investors may be wary of founders who pursue entrepreneurship more for short-term success or potential fame than for a genuine desire to solve an existing problem.

A founder's passion for addressing a specific problem, often rooted in personal experience, is a significant indicator of their commitment and potential for success. This is the motivation that fuels perseverance through the inevitable choppy waters that come with navigating the innovation economy.

How do you prove you have the passion and perspective needed to succeed, particularly when you don’t have a warm introduction?

Tailoring presentations to the preferences and expectations of potential investors while maintaining flexibility is important. Do your research and use all available data to show that you’re a good fit. Reaching out to people who have recently raised can also help you understand what to expect and how to approach potential investors.

A brilliant tribe

Building a solid network and surrounding yourself with a strong advisory team are key strategies for aspiring entrepreneurs.

A strong advisory team brings in-depth knowledge and expertise across different business areas—technology, marketing, legal, finance, and more. Advisors can act as mentors, offering support, motivation, and feedback to the startup's founders.

A well-connected network can open doors to potential customers, partners, and investors as well as lend credibility to a startup and provide strategic insights.

Connecting with other founders and industry veterans can provide invaluable guidance in securing finance. The tech startup community is known for its camaraderie and willingness to support one another, which can lead to collaborations and mentorship opportunities.

A pragmatic approach

The path to launching and scaling a tech startup is fraught with challenges, especially in times of economic stress.

However, founders with a compelling vision, a pragmatic approach to problem-solving, and a strong support network are well-positioned to make significant strides – even when times are tough.