The economy has faced a series of unparalleled crises over the last few years, from the shockwaves of the COVID pandemic, to the collapse of Silicon Valley Bank. Russia’s attack on Ukraine and — now — Hamas’ attack on Israel are further exacerbating economic implications from ongoing geopolitical tensions. This is causing problems with global supply chains, fluctuations in oil markets, and straining relationships among the world's major economies.
In the absence of a resolution to the ongoing wars in the Middle East and Ukraine, the global economy faces tremendous uncertainty in the event of escalations. In these times, businesses are vulnerable to not only global supply chain disruptions, but also investment restrictions, changes in customer demand and spending, loss of productivity, regulatory changes, and other challenges. The startup community must confront this reality and prepare for uncertainty, staying agile to minimize risks as much as possible in the face of potential downturns. Now— more than ever — it’s crucial to build companies that will shape a more resilient future. Remarkable businesses often emerge in challenging times, urging us to focus on what truly matters.
From our experience, here are three impactful considerations for startups when planning for 2024:
1. Cash Runway. As a first priority, you should thoroughly review your cash situation. Here’s a Capital Management Playbook that offers a detailed framework using the core principles of capital preservation, capital protection, and capital creation. If headwinds intensify, know where you can make changes and what you should prioritize. Specifically:
2. Fundraising. Venture capital funding has already decreased this year and we hear that many VCs are prioritizing liquidity in the current environment, making funding dollars even more difficult to come by. However, we firmly hold that there’s always capital available for exceptional companies. What does that mean for founders? If you must fundraise in the next 12 months, start your internal process earlier than you would otherwise and find new ways to stand out, be memorable, and be competitive. Don’t underestimate the importance of powerful storytelling. Here’s where to double down, especially when dealing with physical industries:
3. Operating Plan. Revisit your assumptions for the upcoming year and assess whether prolonged economic issues might affect any of your customers. Use this comprehensive annual planning guide, which emphasizes how to connect your financial performance with strategic objectives, to enhance your readiness for in-period adjustments.
If the last few years of global turbulence have demonstrated anything, it’s that our work of strengthening our essential industries through innovation is more important than ever. At Eclipse, we are actively working with our portfolio of companies in planning on these fronts. History has demonstrated that the world's most transformative companies emerge during pivotal inflection points, using innovation to tackle hard challenges. In times of deep uncertainty, the imperative is clear: proactive measures, risk mitigation, and building resilience.
If you have more questions or if you want to discuss other similar topics, please reach out to the Eclipse team: admin [at] eclipse [dot] vc.
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