How should start-ups act in the face of recession? 5 investors share their advice

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum./

Author: Emanuela Orsini, Digital Content Specialist, World Economic Forum

• While the growth outlook has picked up across all regions, the world remains in economic uncertainty, with persistent inflationary pressures and tighter financial conditions.
• Venture capital funding has halved over the past year, destabilizing the funding ecosystem for young tech companies.
• Five sustainability-focused investors from the UpLink community share their advice on how entrepreneurs should navigate uncertain economic times.

We live in uncertain economic times. According to the World Economic Forum’s latest Chief Economists Outlook, “there are signs of nascent optimism, and the growth outlook has picked up across all regions. However, policy-makers, businesses and households continue to face headwinds, including persistent inflationary pressures and tighter financial conditions.”

According to a significant majority of the economists surveyed for the report, “recent turbulence in the financial sector is not a sign of systemic vulnerability, but further disruption is considered likely this year.”

This disruption is having an impact on start-ups, too. According to the Financial Times, Venture Capital funding has halved over the past year and the collapse of start-up focused lender Silicon Valley Bank will potentially further destabilize the funding ecosystem for young tech companies.

So, how should entrepreneurs navigate these choppy economic waters? Five investors from UpLink’s community of Top Innovative Funds – funds which invest in people and planet-focused start-ups – share their advice.

Focus on your runway and minimize any kind of spending

Alexandra Clark, Founder & Principal, Sentient Ventures

If someone wants to give you money, take it because it’s a really tough time for fundraising right now. Focus on your runway. Minimise any kind of spending. I think last year and still this year it’s all about staying afloat, staying alive. We’re seeing a lot of great companies fail just because of the economic environment. So it’s really just batten down the hatches and stay alive, make it through to next year and we hope that we’re going to be in a better environment then.

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Look for new geographies where there might be demand and a tailwind for growth

Christian Joelck, Partner & Co-founder, 2150

First of all, stay thrifty. As when you started the company, maybe you’ve raised capital the last couple of years, but you don’t know what’s ahead of you. And secondly, then look at your runway. Make sure that you have enough runway to actually ride the storm, which potentially might take 12 to 24 months. And then also look for new geographies, where actually there might be demand and might be a tailwind and growth.

Be persistent and find a way to persevere

Rekia Foudel, Managing Partner, Barka Fund

I think what I will advise is that, just like you’ve started from scratch, for most start-ups, you’re able to bootstrap and make things work. Find a way to make things work. Find a way to persevere. You know, cut costs when you can, you know, do what you need to do to continue because it will pass and then there will be opportunities to receive more funding so you can continue your venture. Be persistent – persevere is really the advice I’ll give them. Because after the storm, there comes a period where you’ll be able to raise funding and be able to continue your activity.

Know your market and be adaptive

Anita Keij, Co-founder and Fund Partner, Chi Impact Capital

In the face of recession, it’s all about having a good product or a good service and looking at the market you’re in and also securing your whole context, including your supply chain, and knowing what’s happening in your market and really be adaptive to what is needed in these circumstances.

Don’t wait for perfection – get out on the market and start generating revenue

Bryan Duarte, Managing Partner and Co-founder, BlackTech Capital

If you’re a start-up that is either more consumer-facing or doesn’t need to develop the technology, it’s how quickly can you get to market? Too many times the start-ups are looking to perfect things. Release it as soon as you can, start generating some revenue and then take your customer input to now modify and make the product better. Start early and get it out there. Don’t wait for perfection. So that’s the way to generate revenue.

For those that are the deeper technologies, like carbon capture, they’re 2028 before they’re commercialized … make sure you have that roadmap well-documented and written out, because when you’re now going looking for investors, if you’re into this deep tech and you know it’s going to take a long time for the technology to develop, have that roadmap, that pathway to success mapped out. Make it easy for an investor to come in and see this is where you’re going, this is where it’s going to be. Some of the greatest companies started in recession – and so if they can be resilient and make it through this phase, then the higher the likelihood of success.