We’ve seen the demise of FTX, causing a tailspin for Crypto that we won’t see the true fallout of for another year, but there will be further casualties.  Some want the asset class more closely regulated (mainly governments), and maybe some light-touch regulation will come into play.  

The Future of Cryptocurrency 

Let’s be honest, though, most politicians still can’t get their heads around the privacy aspect of social media, so it’ll be some time before they can get their hands on regulating Crypto in any meaningful (or detrimental) way.

It remains a solid asset class and has so much to offer as an investment vehicle for founders, especially in emerging markets where governments have tried previously to seize or monitor founders who have raised rounds.  

Blockchain also offers many considerable benefits in providing secure, anonymized checkpoints that could massively benefit the insurance and finance industries.

Startup investment bigger picture, this year and next

The bigger picture of Startup investment has already started to impact funding rounds globally before this year is even out, and it’ll be tougher to raise next year than any time since the mid-2000’s when the dot-com bubble burst.

The inevitable valuation bubble burst this year as the global markets saw the impact of the Ukrainian conflict, inflation rises, etc., which means less money sloshing around.  

That’s as a result of downrounds (where startups valuations are lower when they raise their next or interim round) impacting investor confidence, IPOs that have led to people losing out on the retail markets post-flotation and the cost of living, causing investors to push their available liquidity into the longer term, safer investment bets (or just to bring/retain cash in their checking accounts).

It’s also led to a market correction by VCs where their fund projections have made a dent, pushing the value chain to early-stage startups down.  This means they’re more careful in deploying the money they have and are finding it harder to raise funds to deploy into Startups. Also, we will likely witness a dip in early-stage startup investment. 

What does this mean for early-stage startups?

  • You’ll have to get to a proof of concept (more on this below)
  • You’ll have to have some kind of MVP
  • You’ll have to have a tech co-founder or lead on your deck if you’re raising investment
  • You’ll have to have a ‘revenue first’ kind of approach
  • You’ll have to ensure you’ve properly researched your target market to show a path to product market fit

If you’re an early-stage startup, you need to think of the following math to give yourself a head start as an example.  

Narrow down the field for your early-stage startup

Think of your Startup in a funnel, and the further down the validation route you are, the more likely you are to get invested in.

  • If you have just an idea, you can join 1,000,000 others in your vertical focus (you’re really not going to raise unless you’ve got real connections/previous exits behind you)
  • If you have an MVP or some offline proof of concept, you can join 100,000 others competing for investment
  • If you have some customers and an MVP with a tech team on your deck, you’re down to around 10,000 competing for investment

It’s now pretty much imperative that you execute and get a product out there to validate your thesis if you’re a SaaS/PaaS business in particular or you’re going to be doomed to failure in raising investment.

Going down this route will help you also get to early revenues, so you’re focusing on profitability at an earlier stage.  What better story to approach an investor than early revenues, users, and an MVP that shows you’ve at least part-validated your vision?

Don’t try executing your full vision immediately; take a patient approach to product development. 

Sharing your overall vision with someone like NeoITO means that you can have a team building toward that vision due to the modular nature of how they build products.  You just need to start with what your customers want most first.

The days of blitz-scaling your way to an exit are over (thankfully). This means you’ll focus on what your customer wants and building features they want, and you’re earning revenue in the process.

For those of you that are new to the whole startup world and are wondering what those first steps should be, we’ve attached our Startup Lexicon to get your head around the jargon.

What’s next?

Our next article will be on Building In Public, so you can start to add some strategy to the above approach.

Get an early conversation with NeoITO to see how they can help build out your long-term vision through an MVP or Team Augmentation to help you with those plans.

Suppose you’d like a structured approach to building towards that early validation. In that case, you can also access the full modules of the Magic Sauce investor readiness programme for around $100 at their shop with the code neoito20 to get 20% off the price of a 3-in-1 bundle.

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