How To Succeed As a Startup in a Slow Economy

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If you find yourself in front of an opulent ball, waltzing under chandeliers in the crystal shoes your godmother gave you from Versace, it’s easy to get carried away.

Sooner or later, though, the clocks will strike midnight and the shiny new Tesla that brought you to the castle will turn into a pumpkin in another step towards brand sustainability.

This is precisely what is happening in the startup scene today. For all the nasty prophecies of pandemic-era bullies, 2021 was a stellar year for founders, producing more unicorn startups than the previous five years combined. In 2022, however, things could not have been more different: startup valuations have fallen as venture capitalists become more conservative in their deals.

By now, we all know what happened. The stock market is in shambles, with the NASDAQ losing nearly 30 percent over the past six months. Inflation is rising, with the US hitting record levels and the rest of the world following suit. Strained supply lines, rising wheat and gas prices following Russia’s invasion of Ukraine and many other pressures weigh on the global economy. Investors need to adjust their strategies.

Related: How startups can attract the right kind of investors

As a result, a new wind is blowing on the technology scene. Tech giants are taking a beating as their stock investment efforts begin to backfire. Companies large and small are laying off staff and scaling back their hiring targets. Startups are told to plan for the worst and be more cautious with their war chests, as they can be harder to refill.

So how should startups adapt?

Resistant to the storm

There seems to be an attitude adjustment in the tech scene, which may have been overdue. In today’s turbulent times, entrepreneurs and experts are urging the hyper-scale strategy. Growth for change’s sake won’t cut it anymore, and it’s time to focus on sustainable business models built into the project from its inception.

It’s hard to disagree with these ratings. We lived too long in an era of companies raising wild sums without making a profit in the first place. It may be tempting to keep fundraising, but you’re just putting off the inevitable. When the tide turns, this formula reveals its dangerous nature as money becomes harder to secure.

Related: Coronavirus and the Looming Recession: How to Raise Capital in Uncertain Times

To move forward, companies must focus on creating real value for the customer. A product must stand on its own, be supported by a genuine business need, and deliver significant results. It should be designed to withstand downturns and periods when businesses look for ways to reduce their expenses. Building products that are too good to give up is the easiest way to protect yourself from future downfalls.

Many founders I spoke with recently, including Ronen Korman, CEO of Datorios, share this view. “Only high-quality products will survive the storm,” said Ronen. “Building them is first and foremost a matter of increasing investment in your talent. At the same time, it’s important to rationalize your overall spend and grow leaner and more mixed, not leaner… In times like these , companies must be fast. , efficient, agile and obsessive about their product, customers and talent.”

Turning the crisis into an opportunity

While current market conditions leave a lot to be desired, smart founders can still use a few factors to keep their heads above water and thrive. For example, layoffs and the Great Resignation could create a significant opportunity for companies to strategically expand their talent base. Stephie Knopel, co-founder of AI recruitment company Unboxable, shared her insight into today’s recruitment market.

“When a crisis hits, recruitment doesn’t stop completely,” Stephie told me. “It’s quite the opposite for some companies: experience from previous crises tells us that mid-market companies are more resilient in times of uncertainty. They don’t stop hiring. Rather, they seize the opportunity to hire talent that they usually couldn’t afford it. or attract.”

Companies looking to build momentum despite the downturn need to tap into the pool of talent laid off in recent months. They also need to have a clear idea of ​​what qualities they are looking for and do more to find undiscovered leaders among existing staff.

Some founders are less concerned about the current state of the economy and prefer to focus on the big picture. The market will always go up and down. Some of the most fundamental trends in the industry can expand into the future and give impetus to visionary projects to move forward and ascend. Racheli Vizman, co-founder and CEO of SavorEat, argued that now is the time to be ambitious.

“As you look down at the onset of an impending economic downturn, the typical and natural inclination is to cut back on R&D, cut back on spending and cut back on expansion plans,” Racheli said. “On the contrary, as an agile food-tech company in the middle of the growing Israeli food-tech ecosystem, we are doubling down on R&D and marketing and trying to accelerate our strategic growth plans with partners. We have our sights set on the long term. game, and the megatrends of food sustainability, health and wellness, and personalization aren’t going anywhere.”

The commitment to playing the long game is commendable, as investors often want to see a vision, not just a product. Another lesson for future founders is that the market will always move in cycles. That doesn’t mean innovation has to stop when the bears take over. Of course, investors will hardly be as generous as they were, but innovative products built to deliver real value will always win their favor and their wallets.

Related: Lessons for the Young Startup Leader: How to Survive an Economic Downturn

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