The Struggle- circa 2024

Unless your company has "AI" in its name, the commentary from investors and startups seems to be unanimous: the fundraising environment is extremely difficult.  In fact, many are saying it is as hard as it has been in over a decade:

"The bar is higher.  What investors are looking for is different than what investors were looking for in the past."  - Alyssa Jaffee of 7wireVentures

"Startups will be forced to prioritize solving for capital."  - Michael Marks of Celesta Capital

"At the pre-seed and seed stages, I expect valuations to be on the lower end and stay there."  - Nichole Wischoff of Wischoff Ventures

Specifically for consumer companies, the recent conversations I have had with startups and other venture capitalists mirror closely the comments above.  There are several reasons for this, including the lack of exit events creating a logjam in funding new investments, and higher interest rates capping valuations for companies that have raised in the past.  Some consumer venture funds have pivoted to focus elsewhere- particularly after spectacular recent failures of some direct-to-consumer and social influencer brands- which is further constricting access to capital for startup consumer companies.

But the good news for consumer startup companies is the consumer still accounts for nearly 70% of the US economy, and that is not expected to change much in the foreseeable future.  Moreover, history shows that many of the most successful consumer-focused brands were founded during very difficult funding environments.  In fact, the answer to the question posed in the slide at the top of this post- what do all of these companies have in common?- is that they are all massively successful companies that were founded during very difficult funding environments.  They succeeded because they were forced to build better businesses to withstand challenging funding environments.  They had to develop the grit to withstand the near-term headwinds, which allowed them to accelerate as the business climate improved.

The great venture capitalist Ben Horowitz, in his famous book "The Hard Things About Hard Things," speaks at length about the challenges that good companies have to overcome to succeed- he calls it The Struggle.  "Every great entrepreneur from Steve Jobs to Mark Zuckerberg went through the Struggle and struggle they did....The Struggle is where greatness comes from."

While The Struggle can manifest itself in many forms, the one that seems to be talked about the most right now relates to challenges with fundraising.  And this is not a trivial concern in any environment, given that 38% of the time startups fail due to an inability to raise capital and therefore run out of cash (CB Insights).   But it also is a forcing mechanism: it challenges companies to be better than they otherwise would be early on, thereby setting the company up for greater long-term success if they can manage through the lean times. 

History proves that Anarghya Vardhana of Maveron Ventures will be right in saying "if you are an entrepreneur right now, it can feel like fundraising is really, really hard...but now is the time to build an incredible company."  And if you build it, they will come.