Crunchbase News has reported that Venture Capital dollar volumes have been declining steadily since peaking in Nov. 2021. Between March and April this year, they dropped by a further $ 5 billion to hit a 12-month low. The smart money is on the slowdown continuing as talk of recession gathers steam in the wake of rising inflation With the deteriorating funding environment, many startups have started downsizing their teams. Even well-established startups have also laid off employees despite public protestations of solid business growth.
Before 2016, startups were the first choice of investors. Everybody wanted to launch a startup or invest in one. But 2016 has seen a series of erosion in the startup valuations as the NASDAQ and Dow have gone on wild rides.
While a dearth of financial resources has always been a problem for startups, the current constrained funding environment could hide a sting in the tail. Coming, as it does, in the wake of a pandemic-led slowdown, it could seriously cramp the product release and go-to-market plans of startups. And that would sound like the deathknell for many startups that are looking to scale at this stage.
So, how can a startup business that is cash-strapped keep product plans moving forward?
Top ways to drive startup plans when the funding dries up
- Outsource what you can
Do you know that according to Society for Human Resource Management (SHRM), it costs over $4,000 to hire a new employee? Also, there are additional tasks related to administration, payroll, and compliance that needs extensive manual work. Outsourcing these roles can help you reduce costs. HR outsourcing companies can provide a complete range of human resources services, connects you with top talent, help you with administrative tasks, and ensure secure payroll and compliance within the business.
- Outsourcing of IT services
The global outsourcing market is expected to reach $525 billion by 2030, out of which the estimated value of IT outsourcing is $395 billion in 2022.While technology is vital for running business operations, it is a non-core business function and becomes a major distraction for startups. Outsourcing IT activities can save a lot of time, and money, and free up human resources for the business.
- Become customer-funded
This is the right time to bring in additional money. And if the VCs aren’t biting, it’s only apt to look at other sources. And who better than paying customers? It’s time to scale product development and hit the market to get more clients onboard for the startup’s service or product offering to bring more money. The fact is, this is a litmus test of the long-term viability of the startup’s idea. An idea that survives tough times is likely to be a winner with a secure future. If market validation is important, the aim should be to launch fast and get that before moving quickly into the post-MVP stage where revenues can be generated. As it happens, this is also an important touchpoint for VCs. Startups with visible market traction are more likely to move to the head of the queue for scarce funds.
- Evaluate monthly spending
In the early phase, the primary business expenses include overhead, employee salary, office space, and equipment. In cash-constrained times, it’s important to be aware of the burn rate and how long it will take for the available fund to dry up. Working backward from that will help in setting the goals in terms of business plans and revenues. This will make it much easier to define where adjustments are needed.
- Control unnecessary costs
In better times, modern startups competed to deliveroutstanding employee experiences built on benefits likelavish lunches, gym memberships, fun trips, and more. It becomes important to rationalize these benefits during the low funding period. It may be wiser to engage employees with more targeted benefits like weekly recognitions, appreciation certificates, and the like. Sure, these are not quite as glamorous. But they deliver meaningful value to employees and are easier on the expense sheet.
- Optimize necessary costs
Not all costs are discretionary. Some, like product development, are essential. In an environment where anyway tech talent salaries are through the roof, how is a startup to deliver on product roadmaps when funding is low? Smart startups look toward working with the right international partners to get the best of both worlds. They get technology skills, product development experience, and rationalized cost structures. Also, the ability to flexibly ramp up teams to hit ambitious go-to-market deadlines and then scale back introduces some much-needed flexibility into the equation that can only help with managing cash flows.
Success hacks to the rescue
In all the focus on business survival, it’s important to not get bogged down and ignore the future. Here are some success hacks to grow your startup, even with leaner cash flows.
- Focus on technology and automation – Get inspired by Google and Uber who do not even bother to have a customer service desk. These giants do not believe in solving recurring problems using expensive manpower. They have remodeled business processes with technology and automated solutions for greater efficiency and productivity. Check out what startups must look for in technology partners who can help.
- Don’t scrimp on the key hires – Even when your startups are in the cost-cutting phase, do not skimp on key hires. Prefer attitude over years of experience for that extra bite. Look for people willing to go the extra mile and who can work collaboratively with varied, diverse, and distributed teams. The hack here is to work with technology partners to address key functions without having to take on the entire payroll and management cost and effort.
- Product-led growth– Cancustomer acquisition, onboarding, monetization, and retention be accomplished within the product design?Product-led growth achieves just that. This innovative new startup strategy prioritized product design and development and makes it the bulwark of all growth thrusts. Of course, the strategy demands that the business team work closely with a highly engaged, dynamic, and competent product engineering team to build a great product. This is where strong partnerships with development partners who understand the nitty gritty of the startup life can really make an impact.
Keep your startup afloat with a perfect technology solution
While most businesses are struggling with dried funding, some are achieving success too. Following the right approach and choosing the right technology partner seems to be a key part of the secret formula to keeping a startup afloat even in the most testing time. For startups in the process of developing and launching a product in an uncertain environment, our product development engineers can help you with a flawless solution and support your business with the perfect technology solution. We understand the value of startup ideas and believe in delivering the solution in the minimum possible time. Get in touch with us today.
Sources:
https://www.grandviewresearch.com/industry-analysis/business-process-outsourcing-bpo-market
