Private Capital
Here's Why the Current Funding Winter is an Opportunity for Tech Businesses to Reset
12 Apr 2023
The
recent slowdown in the venture capital market, commonly referred to as the
"funding winter," has been a source of concern for many tech
businesses. However, this period of decreased investment should also be seen as
an opportunity for tech businesses to reset and reevaluate their goals and
strategies.The
funding winter provides an opportunity for tech businesses to reassess their
priorities and make changes that will help them become more sustainable in the
long term. With less capital available, tech businesses are forced to be more
strategic in their spending and focus on the most important aspects of their
operations. This can result in a more efficient use of resources and a
stronger, more sustainable business model.
One
of the key benefits of the funding winter is that it forces tech businesses to
prioritize their spending and focus on core operations. This will lead to a
more streamlined and efficient business model, as businesses now have the
bandwidth to be more creative and find new ways to operate with limited
resources. By focusing on what is truly essential, tech businesses can become
more sustainable in the long term, even after the funding winter has passed.
For
example, tech businesses that specialize in developing mobile apps are now
reassessing their priorities and focusing more on enhancing user experience and
fixing bugs, rather than expanding into new markets.
Another
opportunity provided by the funding winter is the chance to reassess the
company's strategy and direction. With less investment capital available, tech
businesses should look at this as an opportunity to reconsider their plans for
growth and expansion. For instance, companies that have been focused on rapid
expansion need to now reconsider their plans in light of the funding winter.
These companies should focus on consolidating their market share in existing
markets, or pivot to a new business model that is more sustainable in the
current economic climate. Companies should look at this as an opportunity to
redirect resources and focus on the most promising prospects, or to make
changes that will help the business succeed in the long term.
The
funding winter is also an opportunity for tech businesses to strengthen their
relationships with existing customers and partners. With less investment
capital available, businesses need to rely more heavily on their existing
customers and partners to drive growth. This will lead to stronger
relationships and a more robust customer base, which will be invaluable as the
business moves forward.
Tech
businesses that sell enterprise software, for example, are reaching out to
their existing customers and asking for their feedback on their products. This
will help the companies identify areas for improvement and strengthen their
relationship with their customers.
One
of the key challenges facing tech businesses during the funding winter is the
need to manage their cash flow effectively. With less capital available,
businesses need to be especially careful with their spending and prioritize the
most critical aspects of their operations. This can involve cutting costs,
reducing headcount, or delaying certain projects. However, by taking these
steps, tech businesses can position themselves for long-term success, even in a
challenging economic environment.
For
example, tech companies that provide IT services need to reduce their
headcount, delay the launch of non-essential projects, or negotiate longer
payment terms with suppliers to manage their cash flow effectively during the
funding winter.
Closing
Thoughts
The
current funding winter should not be seen as a cause for alarm, but rather as
an opportunity for tech businesses to reset and reevaluate their goals and
strategies. By focusing on their core operations, reassessing their strategies,
strengthening relationships with existing customers and partners, and managing
their cash flow effectively, tech businesses can emerge from the funding winter
stronger and more sustainable than ever.
Author: Shivaraj Jayakumar Manager– Financial Investors
Group, Praxis Global Alliance