How To Survive the Funding Bubble and Grow

Funding may be abundant and easy now but startup bosses should still be prudent in their spending and prepare for a dry spell.

Economists, fund managers and pundits have been expecting the funding bubble to pop for many years – yet it doesn’t seem like it’s going to happen any time soon. As long as governments around the world keep money cheap and abundant- it’s definitely more attractive for investors to deploy their capital into startups and the stock market.

But what should you do if you do if you run a startup – and agree with these pundits that the bubble might pop soon? It is important to keep a long view and make a few decisions based on prudent financial habits.

1) Raise more but spend mindfully

How much more should you raise? The answer is – as much more as you can! Start speaking to your key investors, and lock down promises on paper if you need. Terms will be soon to change if the market takes a turn. If you need to weather a storm, you will need to raise more money than needed. If it goes downhill soon enough, funds will not come knocking at your door. Also, good luck to you if your investor gives you funding in tranches – and it’s based on traction!

Be careful to spend mindfully. That is perhaps the best strategy – conserve cash, and don’t hire excessively or invest into projects that lead nowhere. Don’t aim to be a unicorn; it is better to be a resilient and nimble survivalist. Growth may be stifled as you adjust and adapt continually to ensure survival, but if your investors understand and support your strategy – this could be the best thing for your startup and their investments.

2) Create sustainable growth and strategies

Start planning for your startup to be self-sustaining. This means you and your team have to start booking revenues, it is much better if it can book profits! Drop aggressive growth plans, subsidies and multi-country launches if you know you’ll be low on cash. Stop having the mindset that you could always raise more cash from somewhere. If the market dries up, it’s going to be near to impossible to raise more cash.

However, if you find it difficult or next to impossible to be booking revenues, start cutting down on your expenditure. Cut excessive entertainment tabs and company outings. Do not hire that handsome or pretty interview candidate just because he or she seems smart and could be of “help” to your company.

Being sustainable means doing cost planning ahead of time. This includes writing down plans for hiring, salaries, and running costs. Only by having an idea how much you are burning each month will you be able to manage your startup’s runway – and determine its survivability in times of adversity. Overall, it’s always good to take your growth plans down a notch in periods of uncertainty – but this depends on your investors as well.

3) Value your team

Companies will come into crisis one way or the other. Running out of funding is quite common – but running out of trust from your team is worse at it spells the end.

How to “value” your team? For one, be honest about the company’s situation. After all, they joined knowing it is a startup. If it does not make money, or raise any money, it will be eventually shut – they know this! So, don’t shut them out if you have a crisis. It is important to consider your words, talk to them, and get their buy-in always.

You may also want to differentiate your “core team” from your “extended team” and nurture them. In difficult times, you may to need to let some of them go, but never ever touch your core team. Protect them, watch over them, and together you shall hopefully pull through whatever is thrown at you or your startup!

Adapted from an article by Chong Siong on The Lowdown on Momentum Works at https://thelowdown.momentum.asia/surviving-the-funding-bubble-and-prospering/

Helena Ma brings with her a wealth of experience and a truly cosmopolitan perspective, having lived and worked in Shanghai, China; Gothenburg, Sweden; and London, UK. Her stints in Europe and China has armed Helena with a potent blend of ancient Chinese wisdom and contemporary Western knowledge which she incorporates into business management and client project