Champ Suthipongchai, a General Partner at Creative Ventures, a market-driven Deep Tech venture capital firm in Oakland, CA, is at the forefront of the current funding landscape. With VC firms in the U.S. sitting on a record high of $311 billion in uninvested funds, the pressure to deploy capital is mounting. Terms like “unicorpse” are being used as many high-growth companies are struggling to secure funding.
The startup economy as a whole is facing a funding shortage, with the effects of two years of rate hikes still being felt and no end in sight. The uncertainty surrounding when the inflow of funds will begin complicates the situation for founders looking to raise money amid this VC apocalypse. The key to surviving this challenging environment is adapting to the current reality and being creative in achieving milestones with limited resources.
Throughout the last decade, VCs were able to achieve high returns easily due to cheap money and abundant capital from LPs. However, the current funding landscape has shifted drastically, with U.S. venture funding dropping from $242 billion to $170 billion in 2023. VC expectations for companies are higher than ever, creating a challenging environment for startups to secure funding. Companies now need to demonstrate double the traction with half the resources to meet the high return expectations of VCs.
VCs are placing more emphasis on the story behind a startup rather than just its traction numbers. Selling a compelling vision and convincing VCs of the opportunity being presented is essential to securing funding. Instead of focusing solely on traction numbers, founders should emphasize how their traction supports the product-market fit and growth strategy of their company. Iterating on pitch presentations and practicing with a group of “safety VCs” can help refine the pitch and increase confidence before approaching ideal VCs.
Survival should be the top priority for companies in the current funding environment, as the floodgates of funding may not open as soon as expected. Trimming excess costs, operating efficiently with limited resources, and effectively selling traction through a compelling story are strategies that can help companies weather the funding drought. While it may seem like the dry powder of uninvested funds will never be deployed, remaining resilient and prepared for when the funding landscape shifts is crucial for the long-term success of startups. Consultation with licensed professionals is recommended for specific investment advice.
