Are Investors Right To Be Bearish In The Shifting Startup Landscape?

I had a great conversation with Karen Grant and David W. Wright, ICD.D about investor confidence in our current startup landscape. We’re still in a period of uncertainty and from two investors’ viewpoints, founders should follow some sound strategies in developing a sustainable business including attracting the right investment.

Some key points:
💰 “When interest rates go up, valuation multiples come down. The glory days of the VC era are behind us”

💹 “Interest rates have just recently spiked, pushing down valuation multiples. This makes it difficult for investors to secure excess returns, even if a company’s valuation increases over time”

– Why there is less propensity for VC’s to invest in Pre-seed: “The valuations are usually too small for VCs”

– Angels and Pre-seed: “Angel investors are willing to invest based on the potential of a business idea and the capabilities of the founding team”

– “Investors have been gradually exiting the scene, with historical levels of returns becoming less common lately…. They either age out; they actually hit a point … where it just doesn’t make sense to make new investments that may take ten years before they see the return.”

– 🏦 “The value of bootstrapping: the best source of capital is sales because it does two things: it keeps your staff fed and watered and it adds value to the company at the same time.”

– As you grow and bring in investors, expect equity dilution – “You may not own 100%, you’ve still expanded your own net worth. And that’s why you take on the dilution as long as you can expand the value of the company.”

Hessie Jones – Innovations Manager at Altitude Accelerator

This article originally appeared on Forbes