Hope for the best but expect the worst: That might be the best way to summarize the philosophy of startup funding in 2023.
Business First asked several regional funding players what local companies might have in store this year. Though no one can predict the future, advice like staying lean and getting back to basics came up multiple times. Still, many see opportunities in those tactics for local startups, which tend to be more familiar with doing more with less in a region where venture capital doesn't flow freely.
“There are lean times ahead for the national startup world, but that’s where Western New York can shine,” Alan Rosenhoch, managing director of Endeavor Western New York, said via email.
Carrying some 2022 trends into the new year, local startups can expect down and flat funding rounds, with money harder to come by and some investors playing it safe in a volatile market.
That puts startups in a tricky spot, according to Marnie LaVigne, CEO of Launch NY. They face the double-edged sword of needing to accomplish more to attract capital but doing more with less given the current economy.
She encouraged investors and startups to work with individuals and organizations that can bring the two parties together in broader networks.
For Tom Quinn, CEO of Western New York Impact Investment Fund, efficiency is key.
“I believe that investors and entrepreneurs alike will need a more acute focus and concentration on the most promising ideas but will not have the luxury of growth at any cost but a prioritization on business fundamentals and fierce execution,” he said.
David Brown, managing partner at Impellent Ventures, urged startups to plan their cash accordingly and focus on fundamentals. Shore up to 18 to 24 months of cash, if possible.
“If there’s a resurgence in 2023, count it as a blessing but regardless, know there is light out there,” he said via email.
Getting back to basics also means over communicating plans to teams and investors, because consistency and transparency ensure all parties understand the evolving strategies and progress toward clear objectives and goals, Quinn said.
Although it’s true that some investors are more risk averse amid inflation and a looming recession, others might see the market conditions as the best time to make high-risk, high-growth potential moves, LaVigne said.
And not all predictions are doom and gloom.
Rick Gardner, University at Buffalo’s associate vice president for economic development, expects early-stage funding to stay strong and even grow.
Quinn said his impact investment fund group will look to new investments and also follow-on funding this year, planning to make investments at the same if not a little faster of a pace compared to last year.
“Great businesses will be built as industries shift and leaders falter,” Brown said via email. “Those who focus on core fundamentals and solving real deep customer pain points are going to hit it out of the park."
