Easy-funding and endless financing opportunities from 2021 have come to an end.
Funding standards are increasing as funding availability is significantly decreasing and as investment firms are reviewing their future strategies considering economic and financial uncertainties.
As such, only the strongest startups and business will be able to further their funding rounds by demonstrating efficient business plans, strong teams and coherent timelines. Mobilizing support from external experts can be a strong leverage in rising to these new standards under strained timelines.
In the last 5 years we have seen a clear increase in fundraising and investing with 2021 being a record year. Total fundraising in Europe during 2021 reached €118bn, 40% increase compared to its levels 5 years prior and the highest level ever recorded.
The total equity amount invested in European companies in 2021 – €138bn – far exceeds levels recorded in any year and represents an increase of 51% from 2020’s total of €91bn and 138% increase compared to 5-year prior values. Venture capital investment reached a record €20bn in 2021. This is more than a 70% year-on-year increase from 2020.
The conjecture was promising and fundraising was easy. This was the moment to take risks and test new areas and domain to foster innovation and development. Reflective of that VC investments grew 3-folds in 5 years and Growth investments were multiplied by 2.
We are now facing an uncertain future that is threatened by a period of recession.
Household and country debts are exploding, inflation is booming, interest rates are rising, mortgage rates have risen, financial markets are unstable, commodity and energy prices are exploding. No quantitative easing is coming to save the day like in 2008. Logically, fundraising will become much more difficult and taking risks in investments is no longer on the agenda.
VC and investment companies are more and more demanding (even with their current companies). Overall, VC funding in May fell 14% compared to April and down 20% from a year earlier in May 2021. The largest pullback was in late-stage venture capital, which fell by almost 40% compared to 2021.
In this conjecture we might resort to two reactions: immediate cost rationalisations and investment halt. It seems wise to take immediate decisions as delaying them will be much more costly. However ,there is a difference between early and rash actions. Amid daily activities, objectives reviews and a growing number of constraints it is easy to take early actions that will be just as detrimental to mid and long-term objectives. As an example, cost rationalisations are needed but with the right strategy. First, it is critical to correctly assess your objectives, your spending and preserve investments that will remain crucial.
We are now in a time where only the fittest startups will survive.
Those who can provide a well-defined, targeted and performing product, to gather the best fitted team, to define a realistic but challenging timeline, and set up a strong base for operational efficiencies.
To be successful, startup leaders need accurate and timely market understanding and analysis, information on evolving policy trends and regulatory environment, rapid hiring, streamlined governance processes, and operational efficiency.
They often lack experienced resources to implement lean but structured management processes, experts, and networks to stay abreast of the ever-changing policy trends and regulatory environment, and don't always activate senior management coaching to ensure that teams are operating at the highest level.
While experts can solve the usual development pitfalls in a conventional way, it is more complex for senior management to find both the skills and resources to dynamically adapt to the changing startup situation (structuring, development, performance improvement, restructuring...).
The boutique consulting market offers a wide range of opportunities for those looking for short-term impact.
Offerings include market outlook and product review, presentation review, vendor strategy and due diligence, organization review and implementation, HR/IT/Finance and procurement process assessment/optimization, transition management and executive coaching.
Investing in help that is able in short time to set up these elements for you can be a huge leverage for your company to face the upcoming challenges that we will all have to face as investors, companies, families, and people.
About Franz | How can we help in this situation?
We are a young company and understand your current state of mind, the struggle of creating your business. While Franz leverage on our extensive knowledge on operational efficiency, market research, etc. we are not coming with pre-built patterns that would not suit your company. Our exeperienced consulting team come with extensive knowledge but an open mind. Franz leverage our size to take risks, explore and shift the lines.