Precautionary Measures Every Startup Should Take When Facing a Funding Crunch
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When it comes to launching a successful startup, every entrepreneur would want best funding sources to achieve profitability. The past few years have witnessed many startups like Yumist, Finomena, and Cardback biting the dust because of their fundraising inefficiency to survive the competitive market. On similar lines, recently, Bengaluru-based hyperlocal startup Housejoy issued pink slips to 40 employees.
However, irrespective of the scenario, a founder can ensure a smooth startup journey even if he fails to meet his monetary goals. Entrepreneur India spoke to few experts to know few precautionary measures startups can take to stay alive amidst funding crunch:
Read the Pulse Early:
Alok Goyal, Partner, Stellaris Venture Partners shared it is always best for startups to follow a future-oriented strategy.
“A founder must strategize at least six to nine months ahead. This enables you to play out whatever may come your way. Secondly, be cognizant of the macro environment and the sentiment towards your startup and act accordingly. Awareness is your biggest defense. Once you have met 4-5 investors, you know which way the wind is blowing,” he said.
In Goyal’s experience, most entrepreneurs wait too long to decide their next steps in such situation. He feels waiting too long can cost their own survival.
“If the going gets tough, cut cash burn hard, and I mean hard and fast. Find solace in the fact that in order to win a battle one must remain in the battle and be relentless while making tough choices,” he added.
Find the Right Tech Partner:
According to Aashish Kalra, Chairman, Cambridge Innovations, time to market is critical and accelerating, capital and creativity are not enough to keep pace with the global innovation.
“Building a rapidly scaling enterprise-ready product is challenging. Entrepreneurs are good at creating and selling their vision and they should find a partner to build their technology. A partner in technology helps reduce capital risk and accelerate technology roadmap, which leaves more time for the entrepreneurs to shape and sell their vision,” said Kalra.
For any entrepreneurial venture to become profitable it will take time. Kalra believes, until then, entrepreneurs need to utilize capital smartly.
“Even after securing funding or going fully operational, entrepreneurs have to keep a complete grip on cash flow to be successful,” he concluded.
Lookout for Alternative Funding Options:
Even in the present tight fund scenario, there are a wide variety of options available for start-ups. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services pointed out that the INR 10000 Cr Start-up fund set up by the government can be a good source for startups.
“Another option is crowdfunding which is growing fast and gaining popularity and acceptance. This has the added advantage of being helpful in marketing alongside funding. Incubators and Accelerators are also becoming increasingly accessible to start-ups,” he said.
Adopt Smart Spending Strategies:
For Srikanth Sundararajan, General Partner, Ventureast, it's important for startups to understand the macroeconomics, funding situations and the ability to get funding in the next round. He, therefore, advised that if these factors are slowing down then one must automatically become wise in terms of basically managing their costs.
"You have to be very careful about how much funding you raise and what you are spending. Always keep an eye on the bottom line, there are a lot of signs which show up early so become smart in terms of what you are spending," he said.