Start-ups need to think differently in the current market

Start-ups need to think differently in the current market

People are getting nervous, and start-ups are the first businesses to be affected by the loss of market confidence.

An article in the New York Times said: "The number of people and groups trying to unload their start-up shares doubled in the first three months of the year from late last year, said Phil Haslett, a founder of EquityZen, which helps private companies and their employees sell their stock. The share prices of some billion-dollar start-ups, known as "unicorns," have plunged by 22% to 44% in recent months, he said."

Start-ups are exciting. People have the opportunity to make a lot of money because, in that fledgling phase, there is a high level of risk. Right now, few people have the stomach for gambling. What start-ups need to do is scale-up, showing that they have the strength to weather the economic storm through a strong market presence, a loyal customer base and by developing a brand value that drives sales but is also worth more than the sum of its parts. The key to that is marketing. 

What's different for start-ups now?

It's not as though there haven't been challenges to the start-up market before now. However, to date, start-ups have kept attracting investment and setting records as ‘unicorns’ rise to the fore. Even money-losing companies have been kept afloat thanks to people with money who want to do things with it.

Now, however, things are shifting. The pandemic might have been a shock to the system, but its aftermath, the war in Ukraine and the knock-on effect of Russia's actions have a nebulousness that appears to have no end. There's a sense, not of free fall, but a dawning realisation that no one knows how long this could rumble on or what the long-term implications are. The upshot is nervousness.  

Mathias Schilling, a venture capitalist at Headline, "Everything that has been true in the last two years is suddenly not true … Growth at any price is just not enough anymore."

The New York Times article continued: “What's different now is a collision of troubling economic forces combined with the sense that the start-up world's frenzied behaviour of the last few years is due for a reckoning.”

Interest rates are rising, inflation is rearing its head, and even the wealthiest investors feel more reserved than usual. They're gravitating towards the more traditional mainstays for such economic periods, namely gold, property and medium-risk investment funds across the FTSE 250/ regional equivalent.

The knock-on effect of market anxiety

Business leaders are cutting back within companies of all sizes, but particularly within the more vulnerable sphere of start-ups. Some aim to run on a smaller team by cutting staff and seeking other ways to cut costs while shareholders dump their stock. 'Fintech start-ups lead the layoff wave' shouted Tech Crunch last week.

However, where there are challenges, there are opportunities for those who care to look at the situation differently. As the saying goes, 'when the going gets tough, the tough get going' - do you see the challenges and allow yourself to drown? Or do you look for ways to swim?

Does this situation mean there's no space for start-ups and their investors? Absolutely not. We recently wrote about how to give tech start-ups the support they need to change the world. Start-ups are in a powerful position to drive economic and social change. They can be ideological, they can move more quickly than their conglomerate counterparts, and they can operate in a more agile manner if they seek out options.

How to make marketing scalable and sustainable 

We are no longer in the survival mode that the pandemic called for - head down and hold on could easily have been the mantra for that period. With no end in sight for the current situation, the only option is to look for ways to thrive within it. Cutting costs and operating on a leaner basis is always a good idea. However, as we mentioned at the start of the article, while businesses seek out ways to cut costs and drop if they want to grow, the one thing no company can afford is to stop marketing. However, that doesn't mean you can't be more intelligent with your costs.

The model we operate at gigCMO is about being adaptable to the organisation's needs. It's one of the reasons it work exceptionally well for scale-ups. We enable companies to tap into the skills and experience of our talented team of CMOs without the full-time cost. With our Fractional CMO service, we can support your team on marketing strategy and tactics to help them deliver the required performance to achieve your vision and mission. Through our CEO Whisperer programmes, we offer the support business leaders need to help drive business growth and team cohesion for long-term sustainability. In short, it's high value but proportionally lower cost, and it's a scalable service that you can access as required on a basis that’s tailored to you.

In short, does cutting back marketing costs have to mean doing more with less? Quite the opposite - it's an opportunity to be smart.

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