Leaders of Central Florida venture firms and funds across investment stages agree on one fact: The fundraising landscape for startups is changing.
However, they each have their own tips on how innovative young companies should handle this new environment in 2023.
Why this story matters: Venture money is a crucial source of funding for tech startups. Plus, capital raised by local tech companies can result in high-tech, high-wage job creation and the development of solutions that help other businesses.
The past year was inconsistent when it came to the fundraising climate. In Q2, metro Orlando companies hauled in the most venture money in any quarter on record: $320.7 million, according to PitchBook and the National Venture Capital Association.
However, the next quarter that total plunged 93% to $22.6 million as economic headwinds slowed venture capital deployment across the U.S.
The 2023 economic outlook is a sour sign for early-stage startups in Central Florida, which often are dependent on small funds and angel investors, Richard Licursi, CEO of Orlando-based early-stage venture fund venVelo LLC, told Orlando Inno. "I long have believed that the ability to raise money from the early-stage venture community is related closely to the trends in the public equity markets. As expectations of a possible recession in the general economy loom, it is particularly important that entrepreneurs pay particular attention to cash management."
Despite the warning, Licursi said venVelo isn't altering its investment strategy. What advice do Licursi and other Central Florida investors and firm managers have for local startups that aim to raise money next year? Below, they share their thoughts with Orlando Inno.
Kathy Chiu, managing partner, Orlando-based DeepWork Capital LLC: "Adapt to the new norm. Don't get too hung up on old valuation metrics that no longer reflect market reality. Be judicious with cash spend. But if you are lucky enough to be sitting on a big war chest, also know now may be a great time to acquire technology, partnership and market share, because some game-changing deals are likely available."
Richard Licursi, CEO, Orlando-based venVelo LLC: "I expect the opportunity to raise early-stage venture funds will become exceedingly difficult as we head into 2023. Companies with a strong balance sheet, a recurring revenue stream and solid business practices should seize the opportunity to double down and be aggressive in gaining market share, while companies in a weaker financial position should look to their current investors for additional cash to strengthen their balance sheet on favorable terms. Those without the benefit of a strong investor portfolio should move to bring in additional cash through investment now, as long as they have a good business model and the strategy to support a viable business. In either case, raising money could get much more expensive, so have creative ideas on how to mitigate risk. We remain very interested in strong, coachable management teams with market experience and the strategy to build and grow new and innovative businesses."
Dennis Pape, CEO, Orlando-based SeedFundersOrlando LLC: "The headlines of tech company layoffs and the downturn in the economy should not deter new tech startup founders in building their companies and raising capital in 2023. The best startups will have plans that anticipate these market conditions, including being ever more capital-efficient, raising capital with cash runway and valuation, creating milestone considerations and efficiently and effectively going to market. SeedFundersOrlando invests in startups at the very beginning of scaling, and we will continue to look for startups that have a proven product in the hands of customers providing feedback to de-risk adoption, operate in a large and growing market that provides them the opportunity to scale and have a passionate, dedicated, product-driven founding team that can take the company from its minimum viable product to repeatable sales."
Nekeshia Woods, partner, Winter Park-based Parkway Venture Capital LLC: "Talent, product and positioning. Focus on those elements to compete in an environment where in the new normal strong unit economics, business fundamentals and runway are important factors to the venture investment committee. Think less like the old mindset of 'growth at any cost.' Venture firms are being more selective on the entrepreneurs and companies they back in this environment."
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