Jeb Buckler, CEO of Startup Giants PLC discusses how VCs and intermediaries can actually use these uncertain times to narrow their focus and source the Founders with the mettle to keep going in the face of all odds in new investment times …
Investment leads, whether they’re VCs or intermediaries, can use this challenging time right now to expedite their process of elimination for the next brilliant Founders to invest and believe in and Founders, if they’re tenacious and confident can use this time to surge forwards.
The good element about tough times is that they always shine a light on the tough people – in business, this means that the highly motivated, tenacious and adaptable Founders will not only survive, they’ll thrive.
Predicting the mindset of new Founders is usually a tough challenge, however, I believe it’s actually easier in uncertain times as the investor can see the Founder’s attitude to change and adapting to new circumstances.
Founder evidence carries more weight in a recession
As Gary Vaynerchuck once famously said: ‘The most important thing in a recession, is money in the bank.’ People and businesses analyse their spending and tighten up their purse strings to survive a recession. Therefore the marketing, mission and messaging needs to work twice as hard to get them to open them and to ensure that if they do spend, they spend it with you. Investment spending is no different. Investors are being cautious right now until market valuations are stronger so if a Founder presents themselves with strong letters of intent or sales already for their tech concept, it’s going to make a much stronger statement to potential investors in this climate that people want, need and are prepared to pay for their product or service. I’d say even more so than usual give the overly cautious with budget nature of the current climate.
In terms of investing in startups, valuations are generally lower at the moment which poses better deals for investors. I think to get the investment over the line some of the investors are quite content to see that the founders are growing slightly less aggressively and experiencing growth in a safer, more sustainable way. If the company’s revenue is more consistent and the growth is stable then they view the company as healthy. Once again, management of cashflow and a Founder’s mindset is essential to build trust for investment.
Both investors and Founders can benefit from the mass layoffs
On the flip side this mass layoff actually helps another crisis – the skills shortage. This is actually a very positive and key time for people looking to recruit techies that they might not have had access to without the layoffs.
Also, as we saw from the last recession, a number of techies that had been laid off used the opportunity to create their own businesses – Netflix and Air BnB to name a few – without having the constraints of full time work and board members’ vetoing concepts. Whilst people may be grappling with layoffs, it might be a good time for Founders to recruit and think of out of the box ways to attract the techie talent to their door. For example: if they can’t afford the top dollar wages and bonuses, perhaps offer a a lesser salary with equity in the business in exchange for key deliverables or milestones to be met. Having a key techie in place within the business, shows belief in the concept and is extra brownie points when it comes to investment rounds as it’s more proof that the Founder can do what they promise.
Is AI the main way forwards for 2023?
The sector that I think is going to be really big in 2023 is openAI. The likes of Dall-e and ChatGPT have taken the internet by storm and with Microsoft investing billions into the concepts, I think it’s going to change the way that people create imagery and content. Moving forwards, open AI is really going to propel the largest shift in tech that we’ve seen in a while because building AI into a tech concept or the future of one, is a good way to stay relevant.
It’s all about adapting for the future and changing to the requirements of the economy
With the state of the world at the moment, the days of investing in one singular country are over. Geo-political investing is the way forward to mitigate the risk across multiple countries and continents in order to rally against potential lockdowns, wars and inflations.
Everyone in business has to adapt though and of course we’re no exception. As the search for true and tested Founders continues we’ve adapted how we source and present Founders to investors with the release of our global Atlas Partner Programme and app. Now our tech venture partners around the world, can upload their tech founders to our selection process and if they pass then they’re put forward for demo days and inclusion on our app which is seen by investment leads. Everyone is looking for qualified deals, quickly, we knew ourselves that we’d have to adapt to push forwards and we’re excited to see where this goes.
I2023 will be the year for intermediaries to really push forward again because they will have the opportunity to take many more concepts at the earlier stage over to their investors and maintain deal flow on a geo-political, global basis.