Key Takeaways
- Startups should focus on survival and cutting unnecessary expenses in the current economic environment. This involves having a constructive relationship with investors who can help make difficult decisions and reduce non-essential spending.
- Investors are looking for startups with high growth potential and solid fundamentals. Startups need to be able to demonstrate that their business model is viable in order to attract investment.
- Startups should be creative about different types of funding, such as venture debt, rather than solely focusing on equity funding. For early-stage startups, a gap in debt providers needs to be addressed.
- Startups should double the time they allocate for fundraising and focus on local economic challenges to turn them into opportunities.
- Investors should look for startups with solid finance backgrounds, transparency, and communication skills. This is especially important in the current economic climate, where employees may be worried about their position, and founders need to be able to motivate and train their teams effectively.
Raed Ventures, a MENA-based VC firm, shared their insights on startup trends in 2023 in a recent marketplace session entitled “VC Talks: Raed Ventures”. Wael Nafee, Partner at Raed Ventures, discussed startup challenges and provided advice for existing and new founders.
For existing founders, Nafee emphasized the importance of survival. While founders tend to be optimistic, investors can help them see their blind spots and make difficult decisions to ensure survival. Investors must also maintain constructive communication with founders during challenging times.
Regarding fundraising, Nafee advised founders to take the money and figure out how to make it last for around 18 months, ideally being the last raise. If not, it's time to question the business model. Investors are no longer looking for 10x year-on-year growth but rather fundamentals that can't grow.
Nafee encouraged startups to be creative about types of funding, including venture debt, and to target the correct type of funding. While there are many debt providers for mid-stage startups, there is a gap for early-stage startups.
For new founders, Nafee advised them to double their fundraising time and think of local economic challenges to turn them into opportunities. Nafee hopes to see more B2B companies going global, as B2C companies face many challenges in customer acquisition.
Nafee urged founders to analyze which investors to go with and to favor those who favor the region. The biggest challenges for startups ahead are hopefully short-term, and the best founders are those who survive and come out stronger.
Overall, Nafee's advice is crucial for startups in a challenging market. As an investor, it's essential to maintain communication with founders and help them make difficult decisions for survival. For founders, it's essential to be creative in fundraising and target the correct type of funding.
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