Establishment of a company during times of economic uncertainty and supremacy it takes more than a hungry founder with a good idea. It requires a strong foundation to withstand the market. Companies starting today must focus on becoming profitable while growing, which is only sometimes a priority for companies receiving aggressive VC funding. In the pre-revenue stage, profitability was sometimes top of mind, but keeping operations efficient and focused is critical to maximizing monetization potential.
Investors deal with fewer pitch decks than founders, according to DocSend data — investor activity is down less than 2% year-on-year (y-o-y) from 2022 and 4% from 2021. However, investors are still reviewing pitch decks at a higher clip than 2020, proving there is a market for deals at an early stage, even though Funding down 27% annually in the third quarter.
Every market has its opportunities and challenges. Just a few years ago, a founder’s buyout led to “zombie” companies raising money at unrealistic valuations with a “growth at any cost” mentality, proving that there are pitfalls even in a particularly founder-friendly market.
Now that investors have returned to the designated level, founders must demonstrate that their company is built to last with long-term profitability and scalability in mind. Historically, this follows the lead of big tech companies like Google, Microsoft, and Adobe, which were all or nearly all profitable when they went public.
There will be founders who fail in 2023, but there will also be founders who succeed in launching the companies that define a generation.
Instilling strong building blocks for the company’s foundation is even more critical in a tighter economy and investor market. Some of the most innovative companies in the world were started in challenging economic conditions, and these companies were built to withstand the market they were entering.
The next generation of market-defining companies will operate with the same integrity. A strong foundation helps raise early stage capital and will help the company scale when needed and reach further stages of its life cycle. In the days of growth at all costs, being profitable or keeping track of unit financials was often ignored or looked down upon. This has now clearly changed. For founders now, perfecting the offering, effective sales strategy, and urgent product implementation will create a strong foundation for success that attracts investors.
