Startups can overcome the bumpy market by going back to basics

For the first time in more than a year, global company funding slowed between quarters in early 2022. While the change may set off alarm bells for founders, it’s actually a recalibration after months of unusually large rounds and valuations. . This is a return to a more stable and risk-conscious VC space.

In this lull, founders have a moment to pause, regroup, and maximize resources.

Founders need to go back to basics and make sure that the fundamentals of their company are correct and that they can continue to grow from those fundamentals. It’s not necessarily about how much capital you have, it’s about being efficient — that’s something I learned as a founder and investor through the dotcom bubble, the real estate crash, the financial crisis, and the pandemic.

Here are three ways you can concretely do just that and stay grounded on the road ahead.

Focus on product-driven growth and get your investors to help you

Investors will tell you that you need a track year available and that you should not spend too much during this period. They may recommend that you freeze your team headcount, stay close to your customers, and explore more elastic pricing and products. However, these actions must be based on data. If your growth metrics are in the single digits, the underlying issue may be the rigidity of your product, not the size of your team.

The hypergrowth should come from the core of your product and be mostly organic. Sure, you can use marketing to speed up your exposure to new customers, but if your budgets are tight, your priority should be to create a product that people really love.

Investors need to help you understand user feedback, listen carefully, iterate on your product, and release a better version – that’s the essence of being product-oriented.

Sort your data

Every business generates data in one way or another. What makes your business data stand out is how you instrument, visualize, and interpret it. By optimizing these areas, you can identify growth opportunities no matter how dire the situation.

In the early months of the pandemic, travel and leisure startups had to deal with lockdowns that severely curtailed their operations. Data was key here. One company I work with lost significant revenue, but they did a deep data dive that helped them shift their focus to the bottom line and continue to grow healthy.

“You need to collect data that allows you to see trends before customers act on them”

Deep data analysis helped the company understand which group of customers was most affected by the pandemic. For example, the rental and housing situation in California was very different from that in Florida. Identifying the most important cities (in terms of customers and regulations) was crucial to prioritizing efforts and investments in inventory.

At the same time, trips to cities practically disappeared, but trips in the wild skyrocketed. The data showed that people felt safer outdoors in nature than in concentrated cities. With this explosion of alternative travel, new companies listened carefully to customer feedback and took care to meet their new preferences.

Have conversations with your customers

Being a leader in products for B2B and B2C companies means ensuring that your product always reflects the needs of customers in real time. You have to discard preconceived notions of what you once wanted your product to be. You need to collect data that allows you to see trends before customers act on them.

For example, rising inflation has undoubtedly affected how your customers see the inherent value of your product. You should be sending out surveys, launching in-app touchpoints, and meeting people (virtually or otherwise). Ask your users how they’re doing, if they expect to spend less in the coming months, if they’re having trouble paying for your product, and if flexibility would help. If the answer is a resounding “yes”, consider incentives like buy now, pay later to enable people to consume more easily. This payment method had a big boom in e-commerce last year, especially among younger users who preferred small payments to a one-time purchase.

You could also consider offering benefits and discounts to suit customers’ financial situation, but be careful that doing so still allows people to try the product, not get it completely free. If people are new to your product and can’t afford to buy it after the trial, they won’t, and that will destroy some of the value you’re trying to offer.

The VC recalibration is not, nor will it be, the first of its kind. Being a great entrepreneur requires being efficient by design, which means taking advantage of lulls to refocus the user on the center of your business. Startups that duplicate the value, data, and community at these points will deliver the most value, most of the time.

Laura González-Estéfani is founder and CEO of TheVentureCity.

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