Start-ups, 2023 could be a “nightmare” year
For 60% of start-ups, after the collapse of SVB, it will be more difficult to access the fundraising market, for 22% there is a high concern of not having found capital during the year and 100% believe that the economic trend of 2023 will make the overall business much more critical and difficult to manage” these are some of the worrying results of a very recent survey conducted by the venture capital firm NFX on nearly 900 start-ups. That the “free game is over” for future technological companies seems to be now established.In 2023 they will have to act very carefully and grit their teeth. Unfortunately they had already been coming for a year, 2022, difficult and negative. Already the hypothesis of an imminent global recession had slowed down the trend in loans with the consequent drop in loans for emerging companies. All had placed confidence in the current year but the Silicon Valley hurricane Bangm of Signature Bank and other American and European banks has exponentially increased the worries of investors and the failures of the weaker start-ups.
Start-ups, the concern of sector operators
The confirmation of this state of mind which is widespread among sector operators, entrepreneurs and financial analysts can be seen in the atmosphere at the second edition of South Summit Brazil, in Porto Alegre. The annual event co-organized by IE University. Among the attendees was SAVRpak, an American food technology innovation startup, which highlighted how it was quickly forced to lower its revenue expectations after the banking shock. “We will have to accept a more traditional valuation; those years in which millions of dollars arrived without a product but only on product trust are over “the company took over in an official statement. And not even the Old Continent can claim to be sheltered from this liquidity crisis.
Start-ups, much more difficult to access credit this year
Airway Shield, specialized in industrial biotechnologies, founded by a Spanish manager Julio Alonso, has already started trying to raise money and the response hasn’t been very positive “We spoke to Capital Cell (an equity crowdfunding platform specialized in health), which she was the first backer of the start-up, and she has already warned us that it will now be much more difficult to raise funds”. Most of the entrepreneurs of the new tech realities are now aware that the return to the formidable trust-only revenues of 2021 is just a fond memory. In that year, startups had raised something like 100 times their income. Now the “music” has changed. Venture capitalists are much more demanding because they are afraid of losing capital. For many, the real problem is uncertainty. Everyone agrees that it will be a very difficult period for the entire start-up sector, especially for those in need of funds and facing a downward trend and in the absence of lenders willing to support them.
Start-ups, the search for new models to support the business
But the criticality of the moment seems to have been useful for understanding that we need to change our approach. It seems, for many entrepreneurs, that it is no longer possible to depend on venture capital. We need to be more independent and creative. For example, try not to go it alone and partner with the public sector. Others consider lowering their company’s value expectations and taking a gamble on the diversification of its resources. However, everyone fears the domino effect on the sector. Times are difficult for the whole business world but much more difficult for the high tech sector. Particularly for those start-ups working with debt as interest rates have reduced the availability of equity funds. According to data from Dealroom, a digital platform specializing in innovation, debt accounted for almost 30% of all venture capital raised by European startups in 2022. According to PitchBook, which tracks startups, loans were made in 2022 for more than 30 billion dollars to VC-backed companies in the US, despite rising interest rates. But the entrepreneurs’ nightmares are also geopolitical, especially the war in Ukraine. The difficulty of finding indispensable electronic components could worsen in 2023 and this is a further concern for those who thought until two years ago that they had the wind in their sails without limits.
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