originally published: 2024-02-05 03:02:38
Welcome back to part two of a 3-part article originally featured in Forbes.
We reached out to startup investors and advisors in Canada and the US: Shirley Speakman, Senior Partner with Cycle Capital, Giselle Melo, Managing Director at MATR (matter) Ventures; Glenn Nishimura, Chief People Strategist at Nishimura Consulting; Gayatri Sarker, Founder and CEO of Advaita Capital; Bryan Duarte, Managing Partner at BlackTech Capital; Felicity Meyer, Lead Investor in Cleantech and Foodtech for BoxOne; Olga Cruz, Senior Investment Associate at Good & Well, and Shambhavi Mishra, Director of Growth at Antler to weigh in on the lessons of 2023, what’s in store for 2024 and how startups should prepare.
The VC market underwent a massive reset in 2023, changing the game for both investors and startups. Economic uncertainty and the overhang from existing money in the market limited investor appetite and made fundraising more challenging. What can we learn from this turbulent year?
Mishra, an expert in executing global high value venture capital investments and exits, highlights the need for founders to apply the lessons of resilience and adaptability they learned in 2023 to thrive in 2024. She states:
“2023 was a year of resilience and adaptation for founders. There was a seismic shift in investor sentiment – mirroring global trends of caution and slowdown in investment. Company valuations and funding accessibility rapidly declined, while interest rates continued to rise. This set the stage for entrepreneurs to pivot, seeking resilience and innovation in the face of adversity.”
Duarte, Managing Partner at BlackTech Capital, echoed this view,
“From 2023, the best founders learned how to make the capital invested into their companies last longer. They could no longer count on relatively fast fund-raising rounds so they had to plan on 18-month to 2-year runways between rounds.”
Learning from the past can help us navigate the uncertain future. The scarcity of capital may not be entirely negative, as it also creates valuable opportunities for learning and improvement. Investors can use their experiences to better evaluate risks and opportunities in the market. The emergence of technologies, such as crypto, NFTs and AI, opened new markets and intensified competition. This influx of tech-startups can lead to opportunity overload; however, Duarte believes that the patience and diligence investors learned over the past year can help investors sift through the noise to find a unicorn that will last,
“Investors learned a lot from the rapid pace of deploying capital in 2021 and 2022 and became much more patient in 2023. This will continue well into 2024. In 2023 there were so many write downs/write offs on investments made in the previous two to three years, hence greater diligence is likely. However, I feel this will all help to produce better and more enduring companies versus the latest flash in the pan.”
Sarker, founder of Advaita Capital, also warned that after the Supreme Court’s decision to overturn Affirmative Action in 2023, there may be further scrutiny on “tangible outcomes on DEI dollar deployments, despite overwhelming enthusiasm from corporates, VCs and LPs to promote such programs.”
2023 also underscored the importance of providing founders with the resources, feedback, and network they need to succeed in the competitive and dynamic market. Mishra stated that for VCs, offering “support post investment” has been a key learning to take forward.
Meyer, who leads BoxOne’s investments in climate and food tech, revealed that with the growing excitement around companies focused on food sustainability, founders must ensure that they are leading with strong strategies and practical milestones,
“Companies must adopt realistic R&D strategies, while ensuring they don’t over-promise on commercialization timelines.”
When asked what investors and founders are learning from 2023, Cruz, Senior Associate who leads the impact management practice and invests in early-stage Canadian businesses, Good & Well, expressed this,
“Work with an aligned mix of investors: The vital importance of aligning investors with the company’s mission has become unmistakably clear, emphasizing a meticulous approach to cap table construction. As well, co-investment strategies and collaborative efforts are essential to reduce investment risks and optimize the support available to founders.” Cruz also emphasized founders focus on practical milestones to demonstrate traction… with investors demanding tangible evidence of cost-effective traction before committing significant capital. Finally, Cruz states the importance of bringing your humanity to work,
“Whether you call it stakeholder capitalism, conscious capitalism, or some variation, this approach simply flows from bringing our whole selves to work. Organizations make better decisions when they make room for the full scope of people’s values, concerns, and capacities.”