In a recent article for Fast Company, Graham & Walker Venture VC fund manager Leslie Feinzaig explored the state of the venture capital industry in 2022-2023.
She reviewed a few sources along with her industry expertise to inform readers of the latest VC environment: new and higher hurdles for startup founders to get funding.
Specifically?
- Longer waiting periods to get funding: Seed rounds are taking 177 days (over 25 weeks) longer to form when you compare Q4 2022 to Q1 2022.
- Valuations are lower: The median seed round valuation went from $15M in Q1 2022 to $14M in Q4 2022
- Venture capitalists spend less time reviewing pitches: DocSend found that investors engage 23% less often with startup pitch decks despite founders sending them 30% more.
It seems that venture capitalists are focusing more on their existing portfolios, so the bar to be considered as a new venture is much higher these days.
Plus, startup founders will need more than the vision they previously might’ve gotten away with, to secure funding. Instead, they might wait a bit longer to show more financial history behind their business before pitching. Indeed, later-business-stage ventures are becoming more common, especially with the new “unicorn” startups with existing billion-dollar valuations at the time of pitch.
So, what’s a startup founder to do? Luckily, not all is lost.
Forbes shares some 2023 predictions serving as useful inspiration for today’s business founders.
While the traditional venture capitalist might’ve taken more risk, today’s investors seek more conservative, long-term ventures due to inflation and saturation in the startup market. After all, the pandemic sparked an entrepreneurial boom continuing into this year, as Q1 2022 saw over 1.46 million business applications.
Meaning? Three things stand out.
First, today’s startup founder might need to chisel and coax their strategic plan to accommodate a longer window of sustainable success.
Second? Since investors will be pickier, startup founders might garner more VC leads in a different region. They might cross state lines to one of these high-activity US regions for VC. Or, they could tap into the international market, expanding their sights from the US to Europe and the Asia Pacific.
Finally, today’s startup founders need to get cozier with their existing investors and nurture good sentiment. This means regular check-ins and schmoozing to encourage them to publicly applaud the startup and generate more interest.
But 2023 will take a harder toll on the startup dreamers. To win the VC industry’s favour, founders will need to channel more substance, numbers, and value for today’s market and beyond.
