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In a note to its portfolio company, global venture capital firm BEENEXT said the funding crunch will most likely continue for more than 24 months.
It has recommended all start-ups across sectors and countries to have more than 18 months runway, both through revenue increase (conversion improvement without extra marketing) and cost reduction (cloud credit, better gross margins, optimising marketing channels etc).
The firm added that start-ups should revise and revisit their budget to adapt to this winter (cash flow, business projection, customer segment, marketing, headcount, etc). Start-ups should work together with their existing shareholders on the above exercises and check on their availability of additional capital.
Survival is top priority
Further, with regard to start-ups which have shorter runway than 18 months, BEENEXT said, “Start-ups should try to top up additional capital to extend their runway. For instance, a top up to the previous round. Flat round is not bad at all. Market has changed completely, so we need to be very realistic. Survival is the first priority rather than pricing.”
Start-ups were also advised to reduce employee salaries and compensate them heavily in ESOPs. Along with stopping experiments on new ideas and business lines till the start-ups are able to raise the next round. There should be high focus on doubling down monetisation for the core product, the firm noted.
In the case of companies, which have longer runway than 18 months, BEENEXT said start-ups should preserve runway and get ready for uncertainity. The companies were asked to expect the next fundraising to be extremely difficult and revise all their fixed costs, sales channel, marketing plan, CAC (customer acquisition cost), head count line by line.
“Get prepared for the market change — inflation, high interest rate, customer defaults, higher delinquencies, lower propensity, etc,” the firm added. BEENEXT portfolio includes companies such as BharatPe, Blue Sky Analytics, MFine, Trell, Zilingo, CropIn, EazyDiner, Instamojo, Healthians. Interestingly, two of BEENEXT’s portfolio companies, Trell and MFine, have laid off employees in the past few months.
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