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Today: July 14, 2024
July 1, 2024
1 min read

Challenges for Early-Stage Startups in Continued Funding Winter


TLDR:

– Early-stage startups are struggling to secure funding

– Seed stage deals have decreased, with many VCs making no investments in 2023

The shift in the funding landscape among young and budding entrepreneurs has been noticeable as early-stage startups face challenges in securing funding. With the funding winter continuing for the second year, many new entrepreneurs are opting for alternative sources to raise the necessary funds for their organizations. This shift comes as seed stage deals have decreased significantly, with a 19% drop in deal count and a 33% decrease in total funding from 2019 to 2023, adjusted for inflation. Additionally, nearly 40% of venture capital funds globally made no investments in 2023, further limiting funding opportunities.

As a result, many founders are delaying their VC funding roadshows and focusing on finding the right product-market fit instead. Early traction and revenue are crucial for attracting venture capitalists, with investors seeking proof of a market for the product and a defensible business model. This shift away from traditional VC funding routes is also driven by the increasing pressure from investors to achieve exponential growth, as seen in the case of Dunzo, a hyper-local delivery app that struggled to maintain its market position amid fierce competition and investor demands for rapid expansion.

In response to the challenges in securing seed-stage funding and the demands for early traction and revenue, budding entrepreneurs are exploring alternative avenues to raise capital. Whether it’s through support from friends and family, moonlighting while still working, or securing investments from angel investors, the focus has shifted from receiving the largest check to building a solid foundation for the business.


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