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After 2022, the world will never be the same. Yes, let that sink in. However, business as we know it is not over. Turbulent times create opportunities, and while some things go down in flames, the new and often better creations rise like phoenixes from the ashes.
In this article, you will find insights about what changes the startup market faces now, how it impacts business decisions and business processes, and what you should pay attention to if you want to launch your startup in the near future.
How has launching a startup changed in recent years?
In 2022, the financial markets and inflation have posed multiple challenges for startups. Investors realized that many players that got funded earlier and made it to IPO lost their value. Besides, the startup funding in 2021 grew almost to a bubble that just had to burst. Those things combined have contributed to the slowed funding pace, and consequently, to a dramatic drop in the valuations.
New factors have made startups a different game than in the good years. The VC investments by quarter are down about 50% in 2022 compared to 2021. There is no such thing as free capital now. Investors and angels keep their portfolios close to their chests, trying to wait out the turbulence and see what comes next. Here are several trends characterizing the situation in the startup market as of November:
From the funding that does go out, more goes to the active growth stage and early rounds. The seed stage is doing so-so, and the later pre-IPO is the least funded.
Companies double down on investments into geographical expansion and growth acceleration in lieu of product development.
Heightened valuations are no more. After loud scandals shaking the industry, investors will look more closely at other factors for valuation aside from the company’s revenue growth — namely profitability, vision, management potential and addressable market.
How to launch a startup in turbulent times using new opportunities
Though it may seem that this time can not be beneficial for anything, every crisis clears up the slate for new achievements.
Turmoils create new challenges, which leaves people craving new solutions. Old-school brands like Jeep and Fanta emerged amidst war in reply to unexpected needs and limitations. Uber, Airbnb and WhatsApp are all babies of the recent economic recession and its challenges.
How can you look for the new opportunities these tough times bring? The exact situation in your industry can vary, but there are several good rules:
Do not pretend the times are not challenging. They are. You can be open about it and ask your customers how you can help to win their trust and build empathy.
Focus on the timely needs. Uber started as a premium taxi service for business executives, but what made them skyrocket was allowing hundreds of thousands of laid-off workers to make a quick buck on the side.
Experiment. No need to jump head-first into the muddy waters. Pick several directions you think may work, and test them. Run polls, bring up your ideas in podcast discussions, and see what makes the most sense for your audience.
Explore untapped markets. In the toughest of times, certain groups of people keep their buying potential. Adjust your product or its positioning to target these groups.
Try new things. Doing what everyone did in the good times and expecting the same results is faulty.
Examples of startups that got seed funding in 2022
Financial and business risks management
Environmental consciousness apps
Startups that serve startups
Climate-related risk-preventing apps
What should a startup founder keep in mind to attract money today?
Calculated risks are the name of the game. Today, investors look for forethought with detailed predictions of all possible scenarios.
Showcase your experience: Your website, MVP and appearance offline and online must look professional. Proper email setup is crucial as it immediately gives out valuable information about you. VCs are more likely to invest in second and third-time founders — so you may want to mention your previous endeavors in your fancy email signature.
Foresee a lean digital environment: Scaling in times of crisis is tricky. Automation and digitalization are two proven shortcuts to efficiency in the possible bottlenecks. Also, the massive layoffs in the tech industry hint that outsourced teams will be sought after in the upcoming year.
Track niches that get vacant: The competition for the buyers’ dollars is getting fierce, and players in the crowded markets are dying out. It is time to scoop the audience of bigger and slower companies. Putting your marketing money into growing organic traffic rather than buying crazy expensive paid ads can help you reach your top audience with better ROI.
Put your bets on surging industries: Over the last nine months, many businesses have nosedived while others make their way to the top in days. So far, blockchain and fintech are on a sharp decline. Subscription services and social platforms are on snooze or leveled, though there are amusing newcomers in the field, like the food subscription platforms. The military and everything related is growing exponentially. And while there are established players with stable growth, like healthcare, legal tech, everything cloud and AI, there are also a bunch of new technologies winning over the VC minds. Agrotech, biotech and femtech, to name a few, are taking over the landscape for 2023.
Should you launch a startup in turbulent times? Even the direst and most unstable economic situations bring opportunities since they bring change. If you are launching a startup in 2023, be smart about it. Pick a fast-growing industry, develop a detailed risk management plan, and show investors your idea’s potential, not just its valuation. With the proper preparation, you can pave your way into decades ahead.