How to Succeed as a Startup in a Slow Economy?

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If you find yourself at a grand ball, walking under a chandelier in crystal shoes your godmother got you from Versace, it’s easy to get carried away.

Still, sooner or later, the clocks will hit midnight, and the shiny new Tesla that brought you to the palace will turn into a pumpkin in another step towards sustainability for the brand.

That’s exactly what’s happening on the startup scene today. For all the grim predictions of pandemic-era doom, 2021 was a stellar year for founders, producing more unicorn startups than the previous five years. In 2022, however, things couldn’t have been more different — startup valuations are down as venture capitalists become more conservative in their offerings.

By now, we all know what happened. The stock market is in shambles with the NASDAQ about 30 percent shedding in the last six months. Inflation is on the rise, the US has posted record levels and the rest of the world is following suit. Tensions in supply lines due to the Russian invasion of Ukraine, rising wheat and gas prices, and many other pressures put pressure on the global economy. Investors will have to adjust their strategies.

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As a result, a new wind is blowing on the tech scene. Tech giants are collapsing as their equity investment efforts start to cut back, Companies large and small are laying off employees and reducing their hiring targets. Startups are told to plan for the worst and be more cautious with their war chests, as it can be tough to refill the line.

So how should startups adapt?

hurricane season

There seems to be an attitude adjustment in the technical landscape, which may be overdue. In today’s turbulent times, entrepreneurs and pundits urge against betting on hyper-scaling strategies. Growth for change will no longer cut it, and it is time to focus on the sustainable business model built by its arrival in the project.

It is difficult to disagree with such an assessment. We have lived for a very long time in an era of companies that raise huge amounts of money without any profit. Fundraising can be tempting, but you’re postponing the inevitable. When the tide turns, this sutra reveals its dangerous nature as it becomes harder to secure wealth.

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Moving forward, companies should focus on creating real value for the customer. A product must stand on its own, based on a genuine business need and deliver results in that sense. It should be designed to withstand recessions and periods when businesses look for ways to reduce their expenses. Creating products that are too good to give up is the most direct way to prevent future recessions.

Several founders I’ve spoken with recently, including Detorios CEO Ronen Korman, share this view. “Only great quality products will survive the storm,” Ronen said. “Building them is first and foremost a matter of increasing investment on your talent. At the same time, it is important to streamline your overall spending and be lean and mean, not slim… In times like these, companies need to be fast. Effective, Agile and Passionate on Your Product, Customers and Talent.”

turn crisis into opportunity

While the current market conditions leave much to be desired, savvy founders can still use certain factors to keep their head above water and flourish. For example, layoffs and great resignations can create a significant opportunity for companies to strategically expand their talent base. Steffi Knopel, co-founder of Hiring AI company Unboxable, shares her opinion on the current hiring market.

“When a crisis rears its head, hiring doesn’t stop completely,” Steffi told me. “It’s the exact opposite for some businesses: Experience from past crises tells us that mid-market companies are more resilient in uncertain times. They don’t stop hiring. Rather, they keep hiring that talent. take advantage of the opportunity they normally could not afford. Or attract.”

Companies looking to build their momentum despite the slowdown should tap into the pool of talent that has been laid off in recent months. They also need to have a clear understanding of what qualities they are looking for and do more to find unseen leaders among existing employees.

Some founders are less concerned with the current state of the economy and prefer to focus on the bigger picture. The market will always go up and down. Some of the most fundamental, industry-shaping trends may expand in the future and trigger visionary projects to move further and upward. SavorEat co-founder and CEO Rachele Weisman argued that now is the time to be ambitious.

“Given the onset of an impending economic downturn, the typical and natural inclination is to reduce R&D, cut spending, and scale down expansion plans,” Rachelli said. “In contrast, as a nimble food-tech company in the midst of a growing Israeli food-tech ecosystem, we are doubling down on R&D and marketing and seeking to accelerate our strategic growth plans with partners . Our eye has been on for a long time. The mega-trends of sports, and food sustainability, health and wellness, and personalization are going nowhere.”

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

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