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How early-stage startups can adapt to the new VC landscape

VCs now are much more prudent about their money, but companies can still build the foundations to succeed in the long run.
Judah Taub
May 24, 2022

The VC marketplace is undergoing significant changes, with VCs becoming more cautious with their investments and shifting their expectations for startups. This shift includes increasing KPIs and milestones while reducing investment amounts. To navigate this new landscape, startups should consider the following strategies:

1. Calculate valuation based on future projections: Instead of relying on past performance, determine your valuation based on where you expect to be in the future. Work backward to establish a realistic valuation today, considering the market changes and benchmarking against similar companies.

2. Prioritize needs when raising capital: Clearly define your priorities and be flexible on certain aspects when negotiating with VCs. Focus on working with the right investors and securing the necessary round size to fund the company's future, rather than solely focusing on valuation.

3. Increase efficiency and extend runway: Shift the focus from rapid growth to profitability and efficiency. Cut unnecessary expenses, demonstrate product-market fit, and prioritize sustainable revenue generation to maximize your runway. These actions make your company more attractive to investors.

4. Raise money preemptively: Don't wait until you're in desperate need of funding. Raise money even when you have a comfortable runway to prepare for unforeseen circumstances and prevent compromising other aspects of your business.

5. Prepare for knock-on effects: Consider the challenges faced by other players in your industry and adapt your business strategy accordingly. Spend more time demonstrating the value of your product or service to increasingly cautious customers and adjust your go-to-market approach if necessary.

6. Embrace agility: Market corrections can provide opportunities for savvy companies. Stay agile, adapt to changes, and seize the opportunities that arise during uncertain times.

By implementing these strategies, startups can mitigate the challenges presented by the changing VC marketplace and position themselves for long-term success.

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