Founder's Diary: How to battle the funding squeeze in today's start-up market

Sumit Chhazed, co-founder, CredR
The start-up scenario began with huge rounds of funding in 2015; totalling to a whopping $3.5 billion. However, the investments have slowed in 2016, resulting into a downturn of 40 per cent. According to research, the number shrank to $2.1 billion in the first-half of 2016, signalling a challenging year for start-ups; with recent stories to that effect too.

What else has changed along the way is the target that these companies are aiming to achieve. In the earlier days, start-ups were chasing gross merchandise volume and the number of transactions. With the tightening funding environment, start-ups are now striving hard to make their business models more sustainable. The changing picture for rising entrepreneurs today will involve coping with their competitors, focusing on net profitability, and monetisation.

Today, businesses need to think of every penny spent and be prudent about the investments they make. Having realised the shifting trend and the changing growth metrics, entrepreneurs must rethink the core business values and strategies that they act upon.

Here are some measures that start-ups should keep in mind to save themselves from fading away, when the funding scenes seem unfavourable.

  • Know the key focus areas well. There could be too many problems that you want to resolve but the wise thing to do is to analyse and identify the critical ones. Utilise your spends and resources on finding solutions that get you close to making a mark by differentiating and becoming market leaders.

  • Organic is the way to go! Limit your marketing budget to certain important channels that bring you revenue and visibility. Optimise the channels that work the best for your business and help in reaching your target audience. Organic growth is important for your business and one should look out for innovative ways to multiply it. Adding value to your services and giving your customers the best experience is how you can fetch big numbers organically.

  • Build a team to beat the warriors. Structure your teams correctly and utilise the team strength to the optimum, such that strategies and functions run effectively. Identify the imperative job roles and clinically trim the team size according to the need of the hour. Downsizing is a call that one needs to take when it’s a question of balancing resources at hand and organisational goals.

  • Don’t count on discounts. Discount works well, so does the lure of ‘FREE’; but these are just some of the many ways to pull customers and should not become your core pull strategy. Of course, everyone is playing on humongous discounts, especially in the online space, but you have to make sure that this does not come across as your value proposition. Driving the pull through strong and differentiating USPs is more important than discount-driven transactions.

  • Head on with a plan in place. All the right things can go down the drain if your planning is not up to the mark. Have an overall target planning for a quarter, keeping in mind all external and internal factors. Planned execution will not only help in smooth functioning but also save ad-hoc expenses for the start-up.

While there is a funding crunch hovering overhead currently, at the same time big investments are also making way for those who are playing it right. This indicates that the market is still plentiful in terms of funds to back start-ups; staying abreast with the shifts and trends of start-up dynamics is the new mantra to sustain. If your business model can fulfil the current market expectations, you can easily crack another round of Series X.

The author Sumit Chhazed is the co-founder of CredR

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel