According to data from PFR Ventures, the value of financing granted to Polish startups in 2023 decreased by 42% compared to 2022, resulting in investments in 399 companies compared to 435 companies the previous year. Similar decreases are evident on a global scale.
We can expect limitations in the activity of Polish venture capital funds for at least several months. In the second half of the year, the market situation may undergo dynamic changes; however, until then, one must be prepared for the fact that obtaining external capital injections may be difficult.
Therefore, we have prepared a guide-checklist for founders and startup managers who have not been fortunate enough to receive external capital injections recently or who feel the pressure of a crisis. It’s a set of simple tips and actions that can facilitate maintaining a satisfactory pace of development.
It’s worth taking them up when we see that the project’s growth is slowing down or returning to them periodically to ensure that we are developing it in the most efficient way possible.
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How to Better Manage a Startup’s Finances in Challenging Capital Times? Check These 9 Areas:
📋 Review the business plan and financial model
- Focus your attention, work, and resources on those aspects of the business that generate value and revenue.
- Identify areas where costs can be reduced without harming core functions and processes.
- Prepare several financial scenarios, including pessimistic ones, to better understand potential challenges and defensive actions.
- Determine the minimum revenue level and maximum cost level necessary to achieve plans and how revenues should increase and/or costs decrease to ensure the survival of the business. Consider whether achieving such results is realistic and how.
- Evaluate all products and business lines in terms of their contribution to the gross margin generated by the company. Check whether all contribute a sufficient level of gross margin to justify their continuation. If not, consider closing or selling them.
💸 Check if you’re spending money wisely
- Review all current and planned expenses to identify opportunities for cuts or deferrals.
- Analyze the terms of agreements with suppliers and lessors and consider whether there is room for renegotiation.
- Minimize marketing expenses by focusing on channels that are most effective in terms of ROI and limiting spending on unprofitable channels.
- Consider cheaper alternatives to the solutions you’re using – for example, changing service providers or outsourcing.
- Think about whether you’re fully utilizing purchased software licenses – it may turn out that some tools are completely unused or that a cheaper plan will suffice for the team’s needs.
- Consider whether ongoing development projects will contribute to improving the company’s financial situation in the foreseeable future.
🔄 Focus on cash flows
- Monitor cash flows to ensure that the company has sufficient liquidity to cover current obligations.
- Accelerate the collection of receivables and review the processes and payment terms of obligations in contracts with suppliers: are receivables and payables being settled with too much time buffer before the due date? Is there room to renegotiate payment terms? Are there suppliers in the market offering longer payment terms?
🧩 Adjust products and services to the current situation
- Continuously adjust the offer to meet changing customer needs.
- Consider introducing more flexible pricing models or promotions that can attract customers despite economic difficulties.
- Consider whether, based on existing know-how and products, you can quickly implement new products that will generate revenue, such as a streamlined (and therefore appropriately cheaper) version of the existing product, a marketplace for collaborative solutions, or a complementary product.
🤝 Maintain close relationships with customers and suppliers
- Communicate regularly with key partners. Discuss solutions to reduce costs or otherwise facilitate operations during challenging times. Seek common solutions that can benefit both parties.
- Monitor and analyze changes in customer needs and preferences, especially in the context of market difficulties and their impact on customer behavior.
- Monitor the reasons why lost or non-acquired customers chose competitive solutions.
👨🚀 Focus on the talents in your organization
- Take care of key employees who are essential for the company’s operations.
- Consider flexible work arrangements or temporary salary cuts to avoid layoffs.
- Review the tasks, responsibilities, and effectiveness of all employees to determine the shape of the team necessary to execute the established plan.
- Set goals and tasks for employees. Remember to regularly review their implementation.
💰 Explore alternative sources of funding
- Keep in mind the various possibilities and forms of financing, such as debt financing, crowdfunding, government grants, revenue-based financing, or support from business angels.
- Be open to strategic partnerships or mergers that can provide access to new financial resources and markets.
- Verify with investment funds and other potential investors what criteria your startup must meet to qualify for a new investment round. Include them in your business and financial plans.
🦾 Utilize technology to increase efficiency
- Consider in which areas of your business artificial intelligence could increase efficiency and reduce costs.
- Where possible, automate business processes to reduce operational costs.
🧘♀️ Build resilience and flexibility within the organization
- Develop an organizational culture that teaches and supports the ability to adapt to change and encourages innovation.
- Be prepared to quickly adjust strategies and action plans to changing market conditions.
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