In the fast-paced and unpredictable world of startups, there often comes a time when entrepreneurs and startup founders find themselves in a precarious position – with only a short runway and no clear path to new fundraising.
While this situation can be intimidating, it is not uncommon in the world of startup funding. At such times, startups must carefully consider their options and make tough decisions to ensure their survival.
Some strategies include cutting costs, seeking alternative sources of financing, evolving their business model, or even closing the business altogether. The path forward isn’t always clear, but with the right mindset and approach, startups can navigate this difficult terrain and come out on top.
According to Matija Nakic, co-founder and CEO of Zagreb-based accounting startup Farseer, it’s all about financial discipline and survival mindset.
“You have to have this relentless discipline and you have to first be a cockroach to be a unicorn. For me, it hasn’t changed and I’ve always viewed it as having to be disjointed and relentless in improving your processes and KPIs week after week,” Nakic told The Recursive during a roundtable discussion. on how startups can survive a nuclear winter. , organized by the Croatian AI Association in Zagreb.
Frugality May Be Key
According to regional venture capital firms, frugality can be vital in good times and bad.
“You need to be frugal and make the best use of the money you have. And then when you get the money needed for growth, then you can stop being somewhat frugal and just go for it. It all comes down to do you need to move faster and can you afford to move faster as a business? Do you see yourself breaking even soon, do you see yourself getting a good investment soon. But also, if you’re going to keep up and stick to the plan by hiring or expanding the company for whatever reason, continue to do that,” Tom Vodopivec, principal at VC Silicon Gardens, based in New York, told The Recursive. Ljubljana.
When it comes to hiring strategies in such circumstances, two aspects that can prove essential are the background and the ROI that startups would expect from specific positions from their employees.
“For example, will it be a developer or a seller. Usually these are the two priorities. If you can use external consultants, it’s a question of quality and deadline. We know people have less commitment and will cost you about the same, we are not hiring since you won’t have that commitment. So it’ll just depend on the track and whether you can actually afford it and whether you’re expecting from this person will move you further down the track. Konstantinos Vasilakosa fractional CFO working with successful tech startups and scaleups, tells The Recursive.
Entrepreneurs should always analyze what brings money to the business and what brings prestige, and then make the difficult decision, says Albanian entrepreneur Gerion Treska.
“Focus on cash and the low-hanging fruit without compromising the core value you deliver to customers. Be very open and honest with the numbers and not too optimistic. Be creative with your most loyal customers because they are the main source of your revenue. Find ways to serve them better, how they can suggest new customers to you, find (at low cost to you) incentives that can generate cash flow into the business,” says Treska.
Surviving a nuclear winter all year round
Surviving a nuclear winter for startups can be a daunting task, as it requires great financial resilience and careful cash flow management.
For Ukrainian startups and founders, last year turned out to be a kind of nuclear winter. At the end of 2021, the Kiev-based startup Deus Robotics attracted $5 million in investments, but due to the start of the war in the country, the startup did not receive any further funding in the following months.
“The first thing we did: we started paying part of the salary with options. This allowed us to survive until the next round of investments and increase our runway. The second important point is that all shareholders are obliged to save the company with their own money, and only then revise the salaries of their colleagues if necessary. Fortunately, colleagues from Deus Robotics volunteered to take the initiative and come up with this solution. So the first, combined with the second, allowed us to survive and attract a new round of investments,” Pavlo Pikulin, founder and CEO of Deus Robotics, told The Recursive.
For Viroslava Novosylna, CEO and founder of Ukrainian PR agency SLOVA Tech, honesty in difficult times can also be a good long-term strategy.
“Be open with the team and inform them of the real situation, as well as future plans and decisions. Let them know about the opportunities and support the company can provide during this time. At the same time, support for specialists can be provided through options contracts,” she explains to The Recursive.
Revision and adaptation is another new reality that most Ukrainian startups faced over the last year.
“For example, after the war broke out, most Ukrainian startups and companies focused on building bridges. These are investments intended to support the company and enable it to prepare for the next cycles,” explains Novosylna.
For IT entrepreneur Vladysllav Savchenko, nothing beats receiving the right financial calls at the right time.
“If you can get a positive economy and your business can work to become self-sufficient or even generate a little profit, then in this case time will be on your side. Investors are looking for projects and teams that can make the right financial decisions on time, save money and turn a loss-making business into a project that begins to generate at least a small income,” Savchenko concludes.