The startup funding landscape has changed dramatically in the past 18 months. Valuations have come down across the board, and investors are becoming more discerning about where they put their money.
This is due to several factors, including:
Rising interest rates:
As interest rates rise, the cost of capital increases, making it more expensive for startups to raise money. This is leading to investors demanding lower valuations.
Economic uncertainty:
The global economy faces several headwinds, including inflation, rising energy costs, and the current wars. This uncertainty makes investors more cautious about investing in risky assets like startups.
Public market downturn:
The public stock market has taken a beating in recent months, with many tech stocks down by 50% or more. This has made investors more cautious about investing in private tech companies, as they are concerned about the potential for down rounds.
As a result of these factors, startups need to be realistic about their valuations when presenting to angel groups. You will likely be turned down if you ask for too much money.
Here are a few tips for startups on how to get the best valuation in the current market:
Focus on your fundamentals:
Investors seek startups with strong teams, large addressable markets, and compelling products or services. Make sure you have a clear and concise pitch that highlights your company’s strengths.
Be realistic about your valuation:
Do your research and understand what other startups in your sector are raising at. Don’t ask for more money than you need.
Be flexible:
Be willing to negotiate on valuation and other terms. The more flexible you are, the more likely you are to find investors who are a good fit for your company.
It is important to remember that a lower valuation today is not necessarily a bad thing. It may be a reflection of the current market conditions. If you can raise money at a lower valuation, you will have more runway to grow your business and achieve your goals.
If you are a startup founder, be prepared to answer tough questions from angel groups about your valuation. Be honest and transparent about your company’s finances and prospects. And be willing to negotiate to get the best deal possible.
