Startups can beat the bumpy market by going back to basics

For the first time in more than a year, global venture capital funding slowed between quarters at the start of 2022. While the change may ring 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, risk-aware VC space.

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

Founders need to go back to basics and ensure that the basic principles of their company are correct and that they can continue to grow from those basic principles. It’s not necessarily about the amount of capital you have, but about being efficient – that’s something I’ve learned as a founder and investor through the dotcom bubble, the housing crash, the financial crisis and the pandemic.

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

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

Investors will tell you that you need a year job and that you don’t spend too much money during this time. They may recommend that you freeze the number of employees on your team, stay close to your customers, and explore more elastic pricing and products. However, these actions must be data-based. If your growth metrics are in single digits, the underlying problem may be the stickiness of your product, not the size of your team.

Hypergrowth should come from your product core and be largely organic. Sure, you can use marketing to increase your exposure to new customers, but if your budget is tight, your priority should be building a product that people really love.

Investors need to support you in understanding your user feedback, listening carefully, iterating your product and launching a better version – that’s the core of product-centric working.

Get your data in order

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

In the early months of the pandemic, travel and leisure startups faced lockdowns severely curtailing their operations. Data was the key word here. A company I work with lost significant revenue – but they took a deep dive into data that allowed them to shift their focus to the bottom line and continue to grow healthily.

“You should be collecting data that allows you to see trends coming before customers act on them”

The in-depth 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 key cities (in terms of customers and regulations) was key to prioritizing efforts and inventory investments.

At the same time, travel to cities has practically disappeared, but travel in nature was booming. Data showed that people felt safer being outside in nature than in concentrated cities. With this explosion of alternative travel, the startups listened closely to customer feedback and made sure to cater to their newfound preferences.

Stay in touch with your customers

Being product focused for both B2B and B2C companies means making sure your product always reflects customers’ real-time needs. You must reject preconceptions of what you once wanted your product to be. You need to collect data that allows you to see trends coming before customers act on them.

For example, rising inflation has undoubtedly impacted how your customers perceive the inherent value of your product. You need to send surveys, launch in-app touchpoints, and meet people (virtually or otherwise). Ask your users how they’re doing, if they want to spend less in the coming months, if they’re struggling to pay for your product, and if flexibility would help. If the answer is a resounding “yes,” consider incentives like buy now, pay later so people can consume more easily. This payment method boomed in e-commerce last year, especially among younger users who preferred bite-sized refunds over a one-time purchase.

You could also consider offering perks and discounts to accommodate customers’ financial situation, but beware that this will still allow people to test the product and not receive it completely for free. If people are new to your product and can’t afford to buy it after the trial period, they won’t, and that will destroy some of the value you’re trying to deliver.

The VC recalibration is not and will not be the first of its kind. To be a great entrepreneur, you need to be efficient by nature – meaning you need to take moments of calm to put the user back at the core of your business. The startups that double on value, data and community on these counts will generate the most value, for the most time.

Laura González-Estéfani is founder and CEO of TheVentureCity.

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