funding: Walking along the funding crunch


As things stand today, a funding crunch, or drying up of the capital tap, is real. It is difficult to say when things will turn around, but it seems fairly clear that it’s going to be with us for at least the next 12-18 months. Startups across geographies and sectors are staring at a huge financial crunch, compelling CEOs to think of the most frugal and prudent ways to stay afloat.

Passing through choppy waters is not an ideal time to liquidate one’s equity to raise the necessary funds. One has to think differently, innovatively, think on debt-backed funding. Now, debt funding per se is not exactly an innovative idea. But, today, providers of debt funding have come up with fairly innovative options to enable scaling up business. Plans like revenue-based funding, asset financing, supply chain financing and invoice discounting are just a few examples one should be willing to explore.

There are a plethora of funding options beyond plain vanilla equity fund-raising. These flexible debt options will not only help improve one’s runway but will also help conserve one’s most precious asset – equity.

A funding winter is not the time to experiment with innovative but unproven, risky ideas. It is time to focus on one’s core business. The foremost solutions that most companies turn to while facing a cash crunch are budget slashes and layoffs. As a CEO, it is imperative to take a hard look at the budget and make strategic cuts. Usually, pausing new hires, strict control over promotions, bonuses, appraisals or any pay increases are some ways to stop the bleeding and maintain a lean budget. The handsome rewards the best-performing teammates deserve must be given, but only when the tide has truly turned. The last thing one needs is today’s generosity leading to tomorrow’s layoffs.
Investor and entrepreneur Mark Cuban’s mantra is ‘Sell, sell, sell!’ When in doubt, sell. When faced with challenges, sell. When faced with a funding winter, sell even harder. Selling and improving customer satisfaction is the best cure for any ailment. A company must increase engagement with its customers, and pause any activities that do not add to the bottom line. Forging alliances and partnering with complementary brands and organisations to present unique bundled offerings to the customer are some potential solutions.

Being honest and open when the going is good is easy. But a true test of a CEO’s character is how she or he responds when the going gets tough. Transparency establishes trust – with investors, employees, customers, vendors…. All stakeholders will be with you if you share   your situation honestly, transparently.

Finally, do not lose hope. As CEO, one’s composure and attitude is infectious to teammates, to the board and to investors. By taking charge of the situation, one can set the tone and course of recovery.


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