Despite the downturn, 2023 may provide interesting opportunities for both founders and investors looking to shake up the tech industry. The past few years have seen impressive valuations and fundraising rounds where investors have been won over by great storytelling and a promising business model. And while this is unlikely to be the case in the months to come, 2023 will offer a place for battle-hardened teams to come out on top, as founders buckle down and build resilient business models. To launch a tech start-up in 2023, it will be time to go back to basics with an emphasis on clever cash flow management, product-market fit, and an effective go-to market strategy.
For entrepreneurs armed with a carefully constructed business model, a clear path to profitability, and the resilience to face the road ahead, there is market share up for the taking.
Entrepreneurs should seek out real world use cases where technology solves a specific challenge for the industry
Gone are the days where a cool profile picture or fun storytelling are enough to sell an NFT. That’s okay though, because industries are ridden with challenges that can be addressed using a well thought-out tech solution.
Founders will need to be able to leverage their own industry experience to identify the difference between real opportunities and hype. Meaningful use cases when it comes to blockchain, such as focusing on solving trust issues in transactions or relationships between industry participants. Downturn or not, there are still opportunities for efficiencies to be gained from improving industry practices[MB1] .
Once an opportunity is identified, founders should focus on building a Minimum Viable Product (MVP) to secure their first clients and establish product-market fit. Early stage investments still offer opportunities for founders. While innovative tech used to dazzle and be enough to woo investors, this isn’t necessarily the same nowadays, so demonstrating market share potential through recurring clients and great client feedback is essential.
NFTs are dead. Long live NFTs!
In the specific case of NFTs, founders will need to think strategically about what type of projects are likely to support sustainable commercial gains. There is definitely a place for tokenisation in different industries. For example, luxury brands from jewellery to alcohol can leverage tokenisation to reinforce their value proposition.
Start-ups may launch a line of rare bottles in wine or whisky, where the purchase of an NFT is not limited to a digital image but is also backed by the physical caste or bottle. Different NFTs in the collection may then offer additional perks to strengthen branding, such as right of visit to the distillery or access to additional investment opportunities.
The benefits of such an arrangement are clear: customers alleviate the difficulties of investing by overcoming hurdles such as high price barriers (whole castes are very expensive) or tricky storage requirements (in the case of wine, for example). Whisky Genius, a rare whisky NFT marketplace, takes this a step further by also providing the technology to facilitate the buying and selling of NFTs, helping to create a liquid market for its customers. In such cases, technology is being leveraged to address specific pain points faced by industry participants – and maximising their chances of success in the long-term
Entrepreneurs should seek to create efficiencies in their tech, go-to market strategy, and operations
In the past, healthy markets were forgiving. 2023 won’t be so lenient. Business leaders will need to get back to basics. They should consider, how good is their product-market fit? Is there a client segment they are under serving? How reliable are their supply chains? Who could they partner with to create efficiencies? Which tech investments do they really need to create game-changing efficiency – and which ones are nice to have?
Knowing that they will be faced with extra scrutiny from investors, ambitious start-ups will need to be extra diligent in setting the business on the right course from the beginning. Preparing for raises will take longer so will need to really work on justifying valuation e.g. great storytelling, a sensible business plan that reflects macroeconomics. At this same time, it will need to be ambitious, demonstrating product market fit through meaningful KPIs, and a smart go to market strategy that focuses on winning over small customer segments before expanding/requiring large marketing budgets.
One solution to help de-risk and accelerate their path to growth is for start-ups to create strategic partnerships. Specialised venture builders, for example, offer more than just capital. They also can offer expertise, experience, and resources (and sometimes, their own network of investors) to help a start-up navigate the turbulent launch phase and beyond. The advantage of such a partnership is that venture builders or studios have significant skin-in-the-game and will work with founders to create the most efficient route to MVP. Another partnership opportunity that may help founders overcome the usual difficulties associated with launching a company is to work with an accelerator. Accelerators don’t share as much upside as venture builders but have proven experience in clever launch strategies.
Whatever means founders adopt to launch a tech start-up in a downturn, the opportunity is there. The advantage of surviving now in a downturn will mean less competition ahead as the markets pick up, as inefficient or unlucky competitors are weeded out.