If you’ve been paying attention to the world of Venture Capital in the past few weeks, you may be feeling anything from mild concern to a full-blown panic attack.
Yes, it’s true — there has been a downward market correction. To be more specific, SaaS valuations have dropped 57% and 77% of VCs believe funding will take longer than it has in the past. We all knew the insane acceleration of SaaS growth couldn’t last forever, and we have to adapt to this new reality. Just take a deep breath, and stay calm.
A slowdown in funding does not mean there’s a SaaS bubble, and it will not cause companies to fold overnight. However, it does mean that the way growing startups operate has to change. In a down market, the key to business success isn’t rapid growth — it’s survival.
No one knows this better than SaaS VCs themselves, many of whom predicted the slowdown long before it happened. The top VCs are already strategizing with their portfolio companies to help survive this tough funding climate, and come out ahead on the other side.
In a down market, the key to business success isn’t rapid growth — it’s survival.
The reasons behind this slowdown are numerous. What you really need to care about is what your business should do now. As a SaaS business leader, pay attention to advice from VCs and make adjustments to your own business strategies. Don’t stick your head in the sand and ignore the realities of the market — take action now and ensure your company is one that perseveres.
Forget About Your Valuation
If your company has been lucky enough to reach unicorn status, you may not be part of that exclusive club for much longer. Down rounds have become the norm, valuations are dropping rapidly, and there’s nothing you can do to stop it. In the past few years, valuations were incredibly overinflated and the billion-dollar club grew at an exponential — and unsustainable — rate.
Startups Valued at More Than $1 Billion
That dollar value, unfortunately, doesn’t mean much anymore. Heidi Roizen, Operating Partner at DFJ Venture, worked in Venture Capital during the dot-com bust, and shared some of the painful learnings from that experience. In a down market, she said, you have to forget about the excitement of the past, and make a plan for the future survival of your company.
Stop clinging to your valuation.
“Stop clinging to your (or anyone else’s) valuation,” she advised. “ You know what somebody else’s fundraise metrics are to you? Irrelevant. You know what your own last round post was? Irrelevant. Yes, I know, not legally, because of those pesky rights and preferences. But emotionally, trust me, it is irrelevant now.”
Roizen said startup leaders must redefine their definition of success, and accept the adjusted value of their company, instead of clinging to a unicorn label. What matters more in today’s market is how your company performs overall. Start measuring yourself by the numbers that matter today, not yesterday.