Venture Capital (VC) Funding is a major milestone for startups, they build and hinge their scaling plans on funds they get from VCs, however, 2022 ended with a major drop in VC funding.

Research has it that this is one of the biggest downturns in history, and the phrase “the higher you rise, the harder you fall” might be true in this case.

The cumulative global VC drop from January to December 2022 is placed at 42% by Preqin, a research firm.

A lot of VCs are looking for early exits, and those willing to invest have stringent criteria for the startups to ensure their money isn’t lost. While this is good for VCs, who in recent times have lost huge chunks of money, it is not good for founders.

Given this situation, founders will have increased cutthroat competition for the few available funding, there is also a threat of difficulty in keeping talents which if they fail to will in turn lead to difficulty in meeting investors’ and customers’ expectations, while combating this, founders will also, be under pressure to grow the startup quickly if they want to keep getting funds.

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As a founder, you don’t want to be under this much pressure, hence, you have to start asking

yourself these three very important questions to be able to navigate the funding downturn;

• What are my alternatives to venture capital?
• How can I plan for potential funding gaps while preserving my current cash position?
• Should I need funding in time without alternatives, how can I make my startup more
• attractive to investors?

Answering these questions for your startup can be the key to surviving in this drop in VC funding and while some speculate that the situation is temporary and might end up benefiting the startup ecosystem in the long run, you should ensure that your startup survives long enough to know the outcomes of that theory.

While exploring the above questions, you should also take the following steps:

• Reevaluate your value proposition, and ensure it is unique and distinct, this makes your startup stand out from its competitors and more attractive to VCs. Excellent ability to communicate this value will also help your startup.
• Building a strong, dedicated, and flexible team, will give your startup a competitive edge, and help you have realistic projections, the ability to implement them, and also the ability to produce desired results in different situations.
• Before VCs, building a business wasn’t about impressing your investors with numbers, it was about the end-users, it was about meeting their needs, and getting their trust and loyalty. Focus on that, you can generate the funds you need to scale through them as well, it will just take a longer time.
• Finally, build relationships with key people in your industry. Get introduced to them, start conversations with them, and speak about what you are building, it might get you money in the long run but if it doesn’t it will surely get your startup name and solution out there.

It’s safe to say that founders who will ask themselves the questions outlined and practice the tips listed above, will survive this drop in VC funding and, in turn, build unicorns that will be said to have stood the test of time.

(Source)