Where did all the funding go... Long time passing

Funding for pre-revenue startups has dried up to a large extent this holiday season. And for good reasons. Here they are, at least the top 5:

• The economy: Stupid as it may see, the economy is actually doing very well, but there is an election season on, so the side out of power has to complain about something. Say it enough and it becomes a self-fulfilling prophecy.
• The war: The War in the Ukraine is destroying availability of inexpensive energy and food in Europe and thus around the world. Economic leverage is key to the Russian strategy and devastating to people who are shutting down their Nuclear power infrastructure and forcing themselves backwards. The potential for escalation into a global conflict makes people worry, and of course nuclear holocaust has many folks just a tad nervous.
• Supply chain risks: Supplies largely from China are at risk and slowing, first because of the pandemic with the China Zero Tolerance before shutdown policy, and because of the threats to Taiwan and the potential disruption of the global chip market. It's hard enough to get supplies today, with year long waits for parts, etc.
• It's all about the oil: Of course the autocracies of the world have all lined up to reduce oil supply against the democracies. Driving up the oil price drives up the gas price which drives up shipping and delivery costs which drives up the price of everything else.
• Risk and reward: People take risks for rewards. As companies struggle, the risks of failure increase and the likely reward decrease. It's a vicious cycle. Less funding means more failures means higher risk means less funding, and round she goes.
• BONUS: The Fed keeps raising rates: Increased interest rates caused by so-called inflation associated with the problems above mean that the folks borrowing to invest cannot keep doing it. Their leveraging of low interest loans against real estate investments made the 6-8% return very profitable when borrowing much of the money at 2% interest. But when rates go up to 6% they cannot leverage and may even get their loans called. So they don't have extra cash to invest in other things.

But why does that slow investment in startups?

Because despite the long-term good average returns, when things go bad you may need liquidity, and these sorts of investments are not liquid in any sense of the word, not even over the period of a few years. I am betting on your company to generate money for me in 2030 or so, and I may need the case next year. So I will keep it in something that guarantees a return and lets me get out.

So what can we do about it?

Sell your way out of it. That's always the best solution. Investment is fine, but revenue is better. Way better. We invited our membership (15,000 or so of them) for a free discussion on how to sell your way out of it. Not one of them took us up on the offer. To me this indicates one of two things:

• (1) They don't get it that you have to sell something to get money (even if it's selling investments in your company), or
• (2) They are so depressed that they cannot handle the concept of doing sales to survive and thrive.

In either case, it is a bad sign that entrepreneurs are giving up on even collaborating to try to succeed.

A call to action

We help grow companies. But we cannot help if you do not ask for help. Here's how you ask:

In summary

Get off your back sides and start selling. Nobody will save you if you don't act to save yourself.