How to Scale a Startup in a Financial Headwind

Up your operations game and try alternatives to VC funding.

Written by Lakshmi Shenoy
Published on Jun. 28, 2023
How to Scale a Startup in a Financial Headwind
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It’s harder for startups to secure venture funding than it was last year. 

Thanks to recent changes in the economic climate, venture capital firms are scrutinizing prospective investments more than ever. Companies need to demonstrate proof of traction and a scalable market earlier than they’d have been expected to a year ago. It’s no longer enough to bring a bug-free app to market, for example.

Startup Funding: 6 Sources Beyond Venture Capital

  1. Traditional crowdfunding
  2. Equity crowdfunding
  3. Self funding
  4. SBA loans
  5. Revenue-based financing
  6. Friends and family

How do you prove there’s a scalable market willing to pay for your product? And how do you do this with diminishing resources? To paraphrase Jeff Bezos, the key is staying stubborn on vision but flexible with the details.

Here are three strategies for founders to try.

More From Lakshmi ShenoyIncubator, Accelerator, Tech Hub: A Breakdown of 3 Sources of Support for Startup Founders

 

Use Low-Code and No-Code Tech Tools

If your company is still in its earliest stages, you need to prove product viability before delivering your seed funding pitch. Low-code and no-code platforms are a great way to develop a workable minimum viable product.

No-code platforms such as Buildbox, Bubble and Creatio help complete this work without hiring an in-house development team. That saves you more than just salaries and benefits. It saves time spent hiring and managing new team members.

Too, even when capital is available, it doesn’t make sense to sink a lot of money into the first version of your product knowing that customer feedback will drive significant iterations.

Feedback from your beta users can guide you toward what’s most and least compelling about your vision and how to complete a product roadmap that better positions you to seek funding for full-fledged development.

 

Try Organic Marketing

Today, anyone with a phone and an internet connection can develop content to drive awareness of their startup. While organic marketing isn’t free, as you may invest significant time before seeing results, it can help validate the user appetite for your offering. To focus your efforts, define your goals:

  • Who is your target customer? Who are your target personas? What are their titles and what are their interests outside their jobs? Where are they, both online and off? How old are they and how does that impact where they spend time online and off, what cultural references will resonate with them, how do they prefer to interact with content, and what kinds of content do they tend to interact with?
  • What is your call to action? Do you want them to follow? Like? Subscribe? Download? Start a conversation? Convert from subscribers into paying customers? Whatever your goal, make sure your ask is clear and you’re offering adequate incentive to act.
  • What are cost-effective ways to be discovered? Understand your conversion funnel. How are people be coming customers? What are the stages to getting there? What channels and touchpoints will help you move people down the conversion funnel? And how do you leave online marketing to help you with that conversion?
  • How are you cultivating your prospects? Blog posts, opinion pieces and social media posts can all help position your voice in industry-focused conversations. No matter which option you choose, set aside time to write your content, publish it and promote it. If your users are on social media, engage with them on the platforms they’re most drawn to. Develop posts to drive conversations and connect them to the blog posts you’ve written to get more life out of that content. Even 30 minutes a day can be effective. Your approach doesn’t have to be perfect, just authentic.

 

Look Beyond Venture Capital

You’ve conserved cash. You’ve invested your time in dynamic organic marketing. And you’ve developed a no-code product that’s receiving helpful feedback from beta users. That venture capital investment you want is just around the corner, right?

Even if it is, it’s still helpful to stay flexible and consider alternatives. That way, you can choose which funding to pursue and you have options if one doesn’t materialize. Here are a few other sources to keep in mind:

 

Traditional Crowdfunding

If you’re successfully growing engagement on social media, this might be a good choice, especially if your company is B2C with an engaged customer base. 

 

Equity Crowdfunding

A middle ground between traditional crowdfunding and venture capital, this may be most attractive for entrepreneurs looking to raise more capital than traditional crowdfunding may offer.

 

Self Funding

Leverage the expertise that sparked your company to work as a consultant for customers in your industry, then use your earnings in the startup. Keep marketing in mind: this is also a chance to demonstrate the usefulness of your product to target customers.

Other funding sources, for instance SBA loans, revenue-based financing and friends or family able to offer investment capital are also on the table. If you’re finding it difficult to determine which choice is right for you, seek support from an incubator or innovation hub that can show you the ropes of funding a startup.

Further Reading on StartupsDon’t Get Lost in the World of Startup Funding

 

Stay Flexible to Scale Your Vision

It’s not likely to get easier for startups to receive venture capital investment in the near future. In fact, 72 percent of economists expect a recession by mid-2023. 

However, think back to the successes of companies that emerged during the last recession in 2008, including WhatsApp, Venmo and Cloudera. Consider, too, that navigating the difficulties of securing funding is the reality of building a company and that most startups feel under-resourced, no matter how flush or turbulent the market seems. 

Face the current financial challenges head on and you’ll be better positioned to address what lies ahead.

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