Establishing a company During economic uncertainty, it takes more than just a hungry founder with a good idea to stand out. It requires a solid foundation to withstand the market. Companies established today must focus on becoming profitable as they grow, which is sometimes a priority for companies that receive strong venture capital funding. In the pre-revenue phase, profitability was sometimes top of mind, but keeping operations efficient and focused is vital to maximizing revenue potential.
Investors react to fewer pitches from founders, according to Docsend data – Investor activity fell by less than 2% year-over-year from 2022 and by 4% from 2021. However, investors are still reviewing presentations at a higher rate than in 2020, proving that there is a market for early-stage deals, even though… Financing decreased 27% On an annual basis in the third quarter.
Every market has its opportunities and challenges. Just a few years ago, the founders’ market led to “living dead” companies raising money at unrealistic valuations through a “growth at all costs” mentality, proving that there are risks even in a very founder-friendly market.
Now that investors have stepped back, founders need to prove that their company is built to last with long-term profitability and scalability in mind. Historically, this has been in line with big tech companies like Google, Microsoft, and Adobe, all of which were at or close to profitability when they went public.
There will be founders who fail in 2023, but there will also be founders who succeed in creating companies that define a generation.
Instilling the building blocks of a company’s foundation is even more important in a tougher economy and investor market. Some of the most innovative companies in the world were started during economically difficult situations, and those companies were built to survive the market they were entering.
The next generation of market-defining companies will operate with the same integrity. A strong foundation helps raise capital at an early stage and will help the company expand when appropriate and reach other stages of its life cycle. In the days of growth at all costs, making a profit or monitoring unit economics was often overlooked or disdained. That has clearly changed now. For founders now, mastering the pitch, having an effective sales strategy, and urgently defining the product scope will create a strong foundation for success that attracts investors.