Singapore-based early-stage venture capital (VC) company Beenext became the latest investor to advise its portfolio startup founders to revise and revisit their budgets amid a funding winter.
The fintech-focused VC firm, which has backed unicorns like BharatPe and Open, asked its portfolio companies to revisit their cash flows, business projections, customer segments, marketing, and employee count, amid a global funding slowdown.
In a two-page presentation, the VC also asked founders to have a runway of 18 months by increasing revenue and cutting costs as Beenext said the funding winter may last for more than 24 months. The VC also advised startups to check with their existing investors for additional capital.
"Try to top up additional capital to extend your runway. Flat round is not bad at all. Market has changed completely, so we need to be very realistic. Survival is the first priority rather than pricing," Beenext told founders who have a shorter runway than 18 months.
"Be creative on reducing costs. For example, try procuring AWS, Google cloud credits to remove cloud burn. Try reducing salaries and compensate heavily in ESOPs (employee stock option programmes). Stop experiments on new ideas and business lines till you raise the next round. High focus on doubling down monetization for the core product. Try leveraging partnerships with other companies to sell rather than doing everything alone," the VC added.
Beenext also warend its portfolio founders that their next fundraising will be 'extremely difficult,' and asked them to reduce sales, marketing and customer acquisition costs. The VC asked founders to showcase a 'clear path for profitability.' Freeze new hired until you secure enough capital, Beenext told founders.
"If you are with less than six months of runway no product market fit, you may need to consider acqui-hire or hard reset with only very core team and pivot," Beenext said.
For startups with a longer runway than 18 months, Beenext advised to revise all the fixed costs, sales channel, marketing plan, customer acquisition costs and employee count line by line. Beenext told founders to try improving deeper cohorts for retention and advised them to double down on channels that are working well for companies, while cutting down on low return on investment experiments.
Beenext joins a growing list of VC firms to advise portfolio startups to gear up for a funding winter. Earlier this week, Sequoia Capital, one of the world's largest VC firms, told its portfolio companies that the era of being rewarded for hypergrowth at any costs is quickly coming to an end with investors shifting towards companies who can demonstrate current profitability. The VC firm warned founders about dropping enterprise-to-revenue multiples for technology companies and asked them to focus on profitability.
Last week, Moneycontrol had reported that marquee Silicon Valley startup incubator Y Combinator warned its portfolio companies about the worsening macroeconomic situation and advised startup founders to take money from investors even on terms of their previous rounds, if available. In a similar letter, venture capital fund Orios Venture Partners advised its portfolio startups to become conservative in hiring as it said the capital will be constrained for the startup ecosystem amid the bearish mood of investors.
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