Startups are exploring alternative financing should they not be able to raise capital from VCs
NEW YORK, Sept. 8, 2022 /PRNewswire-PRWeb/ -- Wiss, an accounting firm and growth advisory, announces the findings of its 2022 Startup Fundraising Survey of 100+ startup founders. The findings point to a tougher fundraising environment for startups, especially those at the later stage which are disproportionately impacted by the venture capital slowdown.
According to the study, 42% of startups with an annual turnover of $10m-$49.99m said that they have taken on VC funding and are looking to raise more. That is compared to just 18% of startups with revenue of less than $3m a year. In just six months time, the fundraising environment has become more challenging. 27% of those who are looking to raise said they are receiving less interest than they did six months ago, and a quarter said that VCs made changes to their term sheets that they would not have made before.
"The fundraise environment has gotten more challenging and it's leading startups to get creative with cutting costs and looking at their options should the venture community turn them down," said Matt Barbieri, a startup advisor with Wiss. "The protracted fundraise environment is leading to more layoffs at the later stage and startups of all sizes to increase their runway."
Approximately 65% of startups we surveyed have 6months or less of runway. These startups are exploring alternative financing should they not be able to raise capital from VCs or if their cash reserves become dire. Of those who are currently fundraising, 80% are exploring alternative financing in the form of bank loans (55%) and personal loans (45%). Approximately 40% will seek credit from their vendors, and 24% plan to turn to credit cards.
Start-ups are being advised by an investor to cut costs, of which the majority are doing so (60%). Even those startups that have not been advised to cut costs also plan a reduction. Larger start ups (51-200 employees) are more likely to have been advised to cut costs (73%), than smaller start ups (50 employees) (51%). Startup founders responded to our survey saying that they also plan to increase prices to counteract cost cutting. 38% of those founders who said they will cut costs plan to freeze hiring, and a quarter plan to lower headcount and 21% are planning salary cuts.
Yet, despite the difficult financial environment, 60% of startup founders said they are optimistic about the market. Just 5% of startups were pessimistic.
The Startup Fundraising Survey was conducted in July 2022 by Sapio research and surveyed over 100 startup executives in the United States.
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Media Contact
Lisa Langsdorf, Wiss, 1 3476450484, [email protected]
SOURCE Wiss
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