A return to fundamentals
Why pragmatism, proof, and persistence are the new must-haves for founders chasing funding.
Venture Capital has traded its 2021 exuberance for a 2024 reality check. While there’s still plenty of dry powder, especially at Seed, startups are finding it harder and harder to make it to Series A and beyond.
Gone are the days when $500K ARR could woo investors. Today’s Series A funding benchmarks have climbed to $1.5–$2 million ARR, and with the average time between Seed and Series A now stretching over two years, bridge rounds have become the norm rather than the exception. It’s a marathon, not a sprint, and startups must show more than promise - they need proof.
The mantra is the same across the board for European investors: pragmatic execution, clear market validation and early traction beat shiny hype.
To uncover what it really takes to stand out in today’s funding landscape, we spoke to three top-tier investors: Bob Thomas (Oxx), Daven Nijran-Talwar (REV), and Jesse Heasman (Prefcap). Here’s what they had to say…
Read the full-length interviews on our Substack here for Oxx, Prefcap and REV.
A shift from growth-at-all-costs to sustainable building
In the recent past, many startups operated under the mantra of “growth at any cost.” But as Jesse Heasman of Prefcap points out, the tide is turning. “The advice over the last year or so has been to have it in the locker to flip to profitability if required,” he says. For founders, this means ensuring their business has the potential to become profitable sooner rather than later. “Being able to be profitable means you’ll have the ability to control your destiny,” Heasman adds.
This advice resonates strongly given the current venture funding climate. The market has cooled from the frenzy of 2021, and founders now face greater scrutiny from investors. Having a pathway to profitability is not just a fallback - it’s a signal that the business is resilient, adaptable, and in it for the long haul.
What are investors looking for in founders?
While each investor has their own perspective, some clear patterns emerge when it comes to what makes a founder stand out:
Domain expertise
“Domain expertise is super important,” says Bob Thomas of Oxx. “People with high levels of knowledge in a field typically find Go-To-Market fit faster.” In his experience, founders who deeply understand their industry - be it insurance, healthcare, or AI - are better positioned to navigate challenges and seize opportunities.
Daven Nijran-Talwar from REV echoes this sentiment, emphasising the importance of mission-driven founders. “Anyone can be a founder nowadays, but it’s much harder to be a backable founder,” he says. “That mission isn’t just to raise $100 million rounds; it’s to genuinely try and grow something.”
Heasman, Thomas and Nijran-Talwar all agree that founders with prior experience - particularly those who have weathered the ups and downs of entrepreneurship - have an edge.
A pragmatic approach to fundraising
Overfunding can be as risky as underfunding, especially in today’s market. Nijran-Talwar advises founders to “really consider how much they need to fundraise” and to avoid chasing “lofty paper valuations.” He warns that inflated valuations in early rounds can lead to stagnation later, especially in a contracted market.
Thomas reflects on his own journey, noting that an obsession with high valuations can be a trap: “If you're focused on your customer and your unit economics, you’re thinking about the right amount of capital for the size of the opportunity.”
Resilience and Adaptability
Founders who demonstrate grit and the ability to adapt to changing circumstances are highly valued. As Heasman notes, having the flexibility to pivot or adjust strategy to achieve profitability shows a level of control and foresight that investors find reassuring. This resilience is often what separates successful entrepreneurs from those who struggle to weather market downturns.
Opportunities in today’s market
Despite the challenges, this is an incredibly exciting time for founders. As Nijran-Talwar puts it, “The world has never been more receptive towards new tech and innovation.” With advancements in AI and other transformative technologies, opportunities abound to revitalise traditional industries. He encourages founders to “embrace this exciting climate and build.”
Thomas shares this optimism, particularly for founders who focus on delivering real value. “If you’re building a business where you’re truly focused on your customer, you’re more likely to build something sustainable and impactful.”
Key takeaways for founders
So, what does all this mean for founders looking to navigate the current landscape?
Prioritise sustainability: Make sure your business can pivot to profitability if needed. Investors want to see that you have the tools to weather tough times.
Raise wisely: Don’t just chase high valuations. Instead, think strategically about how much capital you need and what it will take to achieve a meaningful exit.
Seize the moment: The convergence of technological advancements and market readiness creates a fertile ground for innovation. Take advantage of this “once-in-a-generation” moment to build something transformative.
Build with purpose: As the startup landscape evolves, so must the approach of founders. Investors like Heasman, Thomas, and Nijran-Talwar are clear in their advice: founders who focus on sustainability, expertise, and genuine value creation will thrive in this new era. It’s not just about raising money - it’s about building with purpose.
The era of easy money and unchecked growth is over, and founders must rise to meet a more disciplined and demanding market. Investors like Heasman, Thomas, and Nijran-Talwar are looking for founders who can blend ambition with pragmatism, expertise with adaptability, and vision with a focus on sustainable growth.
The message is clear: success today isn’t about chasing growth at any cost. It’s about building a business that creates genuine value, withstands market fluctuations, and positions itself for a meaningful exit.
For founders, the takeaway is to play the long game, prove your resilience, and stay rooted in your mission.
Read the full-length interviews on our Substack here for Oxx, REV and Prefcap.
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