Can your startup survive the economic downturn?
All startups have to navigate the turbulent economic climate of 2023. But whether your company can survive depends on a lot of factors, including the viability and originality of your idea and the amount of cash you have in the bank.
There are ways to merely survive, of course, to hunker down and weather the bad economic cycle. Companies with a long runway can ride out fluctuations in the market, but you have to have an idea that solves a real business problem to truly grow and thrive.
At the beginning of the pandemic in 2020, many VCs extolled the virtues of “just putting your head down and building a product.” If you’re at that stage, it’s not a bad way to look at this moment. Try and ride out the storm in development, and by the time you have a product ready to go to market, things will have improved.
But if you’re trying to sell or maintain your position inside a customer base, it’s a different story. Despite multiple CIOs saying that they would likely keep enterprise spending the same — or increase it — in 2023, that doesn’t automatically mean good news for startups. You still need to convince the key decision-makers that your product is worth keeping in the mix at a time when every line item in the tech budget is under intense scrutiny.
Two trends in the enterprise startup space have emerged from this environment: There’s a swath of niche startups — with VC funding in hand — targeting specific problems that companies face. And there are existing companies that are expanding to look more like platforms than single-issue solutions.
So does that mean 2023 will be a great year for enterprise startups that have expanding product suites and long-term contracts locked in? Will one-trick startups struggle — or even fail? As expected, it depends, in this case on which part of the enterprise stack a company operates in.
But there are perhaps more important questions: How crucial or unique is your product — what makes it stand out? And will you survive the cut? We talked to several early-stage investors about the kinds of startups that are in good shape in spite of the downturn and which ones could be in for a rough ride in 2023.