What does this mean for entrepreneurs?
Entrepreneurs need to focus on execution, customers and demonstrating a path to profitability. In the current environment, it is critical to demonstrate near-term results with existing resources.
- Put a heightened focus on customers. Given that it is less expensive to keep a customer than acquire a new one, reduce churn and focus on those who are more profitable. When delivering a product with high utility, negotiate up-front payments, if possible, with customers to fund additional investments or resources.
- Critically challenge your product roadmap as it relates to timing and monetization. Can you get more from your customers today based on what you invested in your roadmap?
- Make sure you have a proper support network in place to address the challenges and questions you will face in your professional life as well as your personal life.
While some investors and entrepreneurs have experienced downturns in the past, many new entrants have yet to build up scar tissue, which will prove challenging.
October will offer a good proxy for what the new normal looks like. Slow activity over the summer will likely result in a softer start to the quarter because it takes time for new deals to get into the pipeline. We still predict full-year VC activity to finish above $200 billion for 2022.
We expect to see companies that offer real utility gain the most interest from investors, particularly those that develop products and services for necessities, such as energy, health care and information technology.
We are also seeing tremendous interest in climate-related technology, such as electronic vehicle charging and other green energy products. Investors are now more willing to focus on Clean Tech 2.0 as companies address climate change and develop differentiated energy sources.
I often remind investors and entrepreneurs that this current down period is only two minutes in a two-hour movie. The market will bounce back, and investors will continue to direct funding to companies with strong business models and compelling value propositions.