Startup funding is greatly dependent on the law of demand and supply of money in the economy. If the economy is thriving, more angel investors and venture capitalists pour money into seed finance and startup financing and are more confident investing in startups. This is the best time to secure pre-seed funding and seed funding for startups. Entrepreneurs find it easier to connect with the evergrowing availability of angel investors and venture capitalists who are now somewhat more ‘open-minded’ towards startup fundraising.
A bad scenario, in contrast, would be a recession. Jobs lost, businesses being shut down and angel investors for startups fleeing to recover the original seed investments they put in. Because you’re strapped for cash, you need to quickly have an injection of startup financing. As most experienced investors can attest, this is the worst time possible to get startup fundraising.
So now that we’ve established that most startups are vulnerable and can’t get startup funding during the bad times, it’s time to explore the impact of market trends regardless of your startup funding stage; pre-seed funding, seed funding for startups, Series A funding or crowdfunding for startups so that one can be on the lookout for these trends to create opportunities for new firms to raise seed finance, but also navigate challenges in the startup funding stage.
The Impact of Market Trends
To start with, market trends can significantly influence the demand for certain types of startups. For instance, in recent years, there has been a substantial trend towards sustainability and green technologies. This has created a want for startups that are more focused on developing sustainable products and services, which can lead to increased funding opportunities for these startups from angel investors looking to invest in green startups. The uprise of the ‘go green’ awareness has not just influenced investors, but society at large. This provides an excellent opportunity for crowdfunding for startups.
Secondly, as mentioned, market trends impact the availability of the money supply for startups. For instance, during a recession, investors become more cautious and risk-averse, leading to a decrease in seed funding for startups and Series A funding. Likewise, during economic prosperity, investors become more willing to take risks, leading to an increase in funding opportunities for businesses.
Number three, market trends can also make an impression on the valuation of your business. For example, if an industry is experiencing a significant boon, the valuation goes up, creating an environment where startups can raise more amounts of capital at higher business valuations.
Market trends can also have an influence on the class of investors that are interested in funding startups. For example, trends towards corporate social responsibility, impact certain investors who are more interested in providing seed investments to startups that are focused on making a positive bearing on society. In the same way, if there’s a trend towards market-disruptive technologies, venture capital investors may be more interested in firms developing pioneering technologies.
Market trends can also impact your exit opportunities as a startup. If let’s say, an industry is experiencing a lot of mergers and acquisitions, businesses in that industry may become potential acquisition targets, leading to higher valuations and more growth opportunities.
Competition in the market could be another factor. Huge hits on a particular industry, for example, can leave businesses strapped for cash leading to increased competition among firms looking to get financing. Fewer investors are now willing to fund startups in that industry, leading to a ‘winner-takes-it-all’ setting.
Market Trends This Year
- Democratization of early-stage startup funding in tier 2 and 3 cities
- Equity crowdfunding is more popular than bank loans
- Artificial intelligence startups on the rise
- Metaverse startups on the rise
- Grand View Research sees the biotech market rising to a valuation of $3.8 trillion by the end of 2023
- Increase in the diversity of startups:
- Racial diversity
- Gender diversity
- LGBTQIA+ inclusion
- More Growing Trends in:
- Social responsibility
- Health and wellness
- Environmentally conscious firms
- Tech and data:
- Strategic workforce planning
- Analytics platforms
- Skill-building at scale
- AI-based productivity tools
Many of the trends above are likely to continue. For many entrepreneurs, it can show them what industry to dive into, and what more to focus on.
As a business owner, you need to always have an eye on the market. Know what makes it tick. Staying on top of trends helps you blend in further with investors who are looking at the same things you are. Yes, a startup’s world is majorly influenced by what’s ‘out there.’ This does not however call for ignorance. You need to know if your product or service is in demand with the times to not just generate more revenue, but also attract investors. Most businesses can really bolster their funding opportunities by going green, being socially responsible, increasing the diversity of the workforce and thus, contributing on a much grander scale.
At Marquee Equity, we have data-driven analytics powered by machine learning that helps generate the most relevant investor matches for you while giving you direct access to 32,000+ VCs, PEs, Family Offices and Angels to boost your business. Our experts make sure that you’re on top of the trends and help you strategize in a way that not just makes you avoid pitfalls, but allows your growth to skyrocket. Call +1-213-600-7272 now.
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Venture Capital Funding: What You Need to Know
Venture Capital Funding is a dynamic financing avenue for startups, involving investors providing capital in exchange for equity. Key considerations include a robust business plan, team expertise, and market potential. The funding process spans various stages, from seed to Series funding, with exits through IPOs or acquisitions. Understanding this landscape is crucial for aspiring entrepreneurs.