VC Slide 2023: From Wild Party to Hard Reality
Remember 2021–2022? Deals were popping, cash was flowing, and valuations were through the roof. Those were the days, right? Well..the party is over.
Now, it’s 2023. Term sheets are hard to come by. Valuations are lower. Fewer deals are getting done. And since startups usually grab funding rounds every 12–18 months, we’re about to see how things play out for companies that partied 18 months ago. For the ones who partied the hardest (raised the most, burned the most, are the most underwater on their valuation, etc.) it’s going to be a total bloodbath.
Bumpy road ahead but not impassable
Every CFO I know is in savings mode. Budgets are being squeezed. Purchases cut. Investments? Forget about it. That’s the world we’re living in now.
But there’s good news: this is not the first time in the history of business in which CFOs have counted coins during tough times. I know it sounds crazy, but businesses have endured and weathered worse situations. But if your startup went wild in the 2021–2022 boom, things are looking a bit dicey.
Protect your chips…live to play another day
In 2021, VCs rewarded companies for growth to the exclusion of basically everything else. But the game’s changed. In my $0.02, existing customers — specifically focusing on gross retention — should be Priority #1, #2, and #3.
Grow a little slower from new logos and make your existing customers joyful. This macro situation won’t last forever. Budgets will come back eventually. And oí! Check out all these amazing, joyful, and sticky customers…you couldnt pry my customers away from my product if you tried!
High retention is a very simple and powerful signal that your product hits the spot for users. It’s satisfying their needs. It’s why they’re sticking around, renewing their subscriptions, choosing to keep getting value from your product. And that’s music to any CFO’s ears too.
Conclusion
Let’s not sugarcoat it: Fundraising will be tough thru 2023. Investors in this environment are hunting for products that are beloved and sticky. That’s where VCs will be investing. Products that customers really want.
Joyful customers are the best bet to ride out the storm of 2023.
—
If you found this post useful, you might also enjoy this one: Manage Due Diligence on Your Terms the Right Way
I’m on Twitter @austinogilvie and LinkedIn /in/austinogilvie
Learn how Thoropass streamlines digital compliance: https://thoropass.com
