Geopolitical circumstances impacting businesses all around the world. The recruiting market is tightening even further. Recruiters from various company sizes and industries share one common challenge: Attracting and recruiting talents. Less candidate inflow, active search not working any longer, colleagues handing in their resignations. At the same time, companies seeking for investments and depending on venture capital seem to become more cautious lately on where to send money and who to hire now. Hiring freezes have been announced. So what are the driving factors and will the market circumstances worsen or ease soon again?
Cherry Ventures, a seed-stage venture fund, summarised the market situation in their article "Fundraising guidance for founders" earlier this months quite holistically. We are happy sharing some of their findings below.
Technology continues to be hit the hardest
"We anticipate that private financing rounds will be impacted across all stages with smaller rounds sizes and lower valuations. This is due to tightening money conditions fuelled by strong inflation fears and geopolitical conflicts, such as the war in Ukraine. In particular, companies with publicly-listed peers will face significant headwinds when pricing their next rounds as investors refer to lower valuations and potential illiquidity discounts."
What we're advising
"This is not just a late-stage problem. Businesses of all stages and valuations are likely to be affected in some manner as investor appetite cools. But it’s not just founders or investors. Expect consumer spending — and new customer uptake — to decrease. Largely as a measure to combat inflation, central banks are raising interest rates. We’re already seeing this with the Federal Reserve in the U.S., which has just announced its biggest interest rate hike since 2000. As a result, the cost of capital, like borrowing costs and other prices, will rise, forcing many consumers to cut their individual spending. As this continues, B2C businesses will be first affected, but B2B may be affected in the midterm."
"Consider raising additional capital if a serious opportunity presents itself as a measure to extend your growth. It may also provide the opportunity to regain market share as the climate begins to improve. Creating additional runway will position your company more independently from the external fundraising environment. So, don’t wait until raising capital is a “must” but rather a choice."
"Take a fresh view at your budgets and cost structures — cash is king. Cut nonessential costs and expenditures, and look into renegotiating certain contracts. Also begin to sketch out alternative scenarios that can be ready to act upon if needed."
"Our most important point: don’t panic and stay focused. It will always be hard to time markets as an early-stage founder. At the same time, great companies will continue to raise. Act with a prepared mind and focus on what you do best — building strong companies with an outlook on the long run."
Source: Read the full article here.
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