There are a lot of discussions in the startup and VC communities about the whole economic state, the different asset classes’ valuations, and the valuation of startups. There have been re-evaluations of sectors for investments. With inflation on the rise, interest rates rising, and geopolitical uncertainty, 2022 or 2023 will remain turbulent for the economy. We will continue to see corrections in the market, some short-term and others may be long-term.
Should you be worried about it as a startup founder? No, not at all. As a startup founder, depending on what stage your startup is in, you need to be more focused.
As an early-stage startup, you have to focus more on your product and build it such that it can sell itself. If you are solving a real problem and your product is easy to use, it would need minimal to zero marketing spend. If you are building something from the ground up, I would suggest having an advisor who has been through that domain, understands it in and out, and can bring a true perspective from the customer experience. If you are that guy, then my recommendation would be to go out and validate your perspective with an industry veteran.
As a mid-sized startup, you need to be more focused on executing your strategy than ever before. You need to be more focused on your current and prospective customers. You need to re-think the growth of your ARR so far and have a clear direction for the next 2 years with your marketing, sales, product, and engineering teams aligned to it.
In any market situation, startups of all sizes need to continue to bench mark the percentage growth of ARR and burn multiples. Any investor would like to understand the past, present, and future of these two key factors. In the current state, which may persist for the next few months to a year, these factors will be more important than ever. I always suggest startups build the product so that marketing effort is minimal. Put out your beta version for free to your target users. Let it help solve their pain-points and it will market itself from there on. Another recommendation is to do your scenario planning (base, best, and worst case) with current numbers and if you have enough runway, don’t raise funds.
The market is tough and may get tougher, but funding is always there, less or more, for startups that have the right focus on solving problems. Feel free to reach out for any advice.
