Innovation may be the engine of economic growth, but the journey from a groundbreaking idea to a thriving business that transforms industries and creates jobs is fraught with seemingly insurmountable obstacles. Building a sustainable business, let alone one you see on the cover of a magazine, will always be a Herculean task.
But the current startup economy – marked by peculiarity and uncertainty – is making the journey from innovation to impact even more daunting.
Funding sources have become scarce. The market is still in the midst of a post-Covid slump, and while the number of new businesses surged in 2022 and 2023, capital availability remains low and the fundraising environment is increasingly competitive. Pitchbook’s Q2 2024 Venture Monitor report indicates deal activity has returned to pre-pandemic levels, with extended fund lifecycles. Heightened regulatory scrutiny and a strategic focus on short-term gains by acquirers have led to a significant drop in M&A activity.
The talent pool, too, has become murky. According to Redpoint Ventures’ State of Talent report, headcount within venture-backed startups declined for the first time in over five years in 2023. This trend has continued into the current year, and reflects broader difficulties attracting and retaining skilled talent in an increasingly challenging market.
Additionally, there appears to be a deepening rift between product development and customer needs. For example, the AI boom has supercharged innovation – and is responsible for the most positive indicators in funding and hiring trends – but it’s also magnified the misalignment between product teams and customers. Startups across industries are guilty of hastily integrating AI into their offerings without consideration for customer needs. The end result is investment in products and product features that may not solve real problems or help customers meet market demands.
Despite these obstacles, founders should keep the faith. Navigating uncertainty is foundational to the startup journey. By keeping three core principles top of mind, founders can sidestep common pitfalls and reinforce the resiliency of their business.
Capital efficiency is just as important as raising capital: Now more than ever, founders should shift their focus toward efficient growth and strategic spending. There is a continued need for startups to seek and retain the talent that will ultimately drive their business forward, and higher pressure to bolster deal flow. Achieving both will require streamlining operations. Founders should be encouraging their teams to remain vigilant for opportunities to shorten sales cycles and reduce run rates, turning processes that once took months into weeks.
Building a solid business foundation beats rapid expansion almost every time and will be especially critical as startups experience longer stretches of time between fundraising events. Doing it well requires a true understanding of your customer.
Don’t assume that your priorities are your customer’s priorities: Thorough customer discovery is the difference between success and failure. Even the most well-intentioned product will fail if its function does not align with the daily realities and needs of the people or businesses it was designed to help. A smart medical device, for example, may be rendered useless to a healthcare provider if the end user does not have a stable internet connection. At the end of the day, customers need to see the tangible benefits of a product: the ways it will either improve their business or make their lives easier.
Fostering a culture of adaptability and responsiveness to market feedback is essential – and it starts with leadership.
Stop thinking like a founder and start thinking like a CEO: Every founder, at some point on their startup journey, will need to reckon with the same question: Am I the best person to lead this company? More importantly, they’ll need to be amenable to whatever the answer is. The skills required to build a startup are not always the same as those needed to scale and sustain it.
While founders are often task-oriented visionaries with technical expertise, CEOs should be strategic, big-picture planners with the ability to communicate with and coalesce stakeholder groups. The former is not always best-equipped to convince investors – who want reliable projections and evidence of sustainable growth – that they should invest in a fledgling company. The earlier a founder can embrace the mentality of a CEO, the better.
Looking ahead, there are reasons to be optimistic about the future for startups. Economically, stable or declining interest rates may encourage increased deal activity. Additionally, shrinking fund sizes may open up new funding channels from non-traditional and strategic investors. No matter which way the wind blows, it is clear that startup support initiatives will become increasingly critical in the coming years. These programs can provide startups with the financial resources, mentorship, and network they’ll need to thrive through economic turbulence. They can also provide educational programming that can help founders firm up their go-to-market strategies.
While startups in highly regulated industries like healthcare and finance are almost certain to face heightened scrutiny, there are controllable factors that can offset these challenges. Startups should focus on developing their technology, building their talent pipeline, and thinking about how and where they engage with customers. It’s worth remembering that, while technology seems omnipresent, that’s not the case for everyone – especially those who stand to gain from its greatest benefits.
As with life, it’s important to focus on the things you can control so you can mitigate the things you can’t. History has shown that great companies emerge from challenging times. The turbulence of the current market need not define your startup’s fate.
Picture: akindo, Getty Images
Tiffany Wilson, president and CEO of University City Science Center, has spent over 20 years bringing innovative medical technology from bench to bedside and is known globally for her thought leadership on innovation and commercialization in life sciences and healthcare technology. In October 2020, she was appointed President and CEO of the Philadelphia-based University City Science Center to lead the organization’s next chapter focused on delivering economic, scientific, and civic impact. Operating at the intersection of startups, healthcare, and community, the Science Center drives inclusive economic growth across Greater Philadelphia and advances best-in-class healthcare solutions for all.
This post appears through the MedCity Influencers program. Anyone can publish their perspective on business and innovation in healthcare on MedCity News through MedCity Influencers. Click here to find out how.
