The market has taken a massive turn in recent months. The second quarter was the first time deal value fell below $77 billion since the fourth quarter of 2020, and this past quarter has seen the lowest amount recorded for a single quarter since the start of 2021. There’s been a massive drop in how much investors are funding companies, especially startups.
Due to this environment, funds can no longer be just a source of capital for startups. As the market tanks, funds need to become more valuable to their startups because there are fewer deals happening. It is important for founders to recognize this and leverage their VCs during these times.
When the pace of deals slows, investors start paying attention to a company’s infrastructure and fundamental business. Although a downturn can be viewed as negative or challenging for a company, it can be a great time to evaluate internal processes and see what needs improvement, what isn’t working and what needs to change.
Giving founders capital is great, but it’s also necessary to give them all the tools they need to build their companies, funds or careers successfully.
Rather than the main focus being on the next funding round, founders have the opportunity to focus on product, operations and revenue. This can be a chance to reprioritize and rebuild.
Funds can do that, too.
Having the right people in your corner when you’re first establishing your fund is critical. For instance, the Entrepreneur First program helps entrepreneurs who still have day jobs find people who would be good potential co-founders. It backs founders and their early startup ideas. The aim is to always put part of the earnings back into the company to grow its operations and foundation.
The types of infrastructure VCs are building range from networking and education to operations.
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