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With a Slowdown in Investment Deals, Tech Startups are Advised to Cut Expenses and Plan for the Long TermSAN FRANCISCO, April 28, 2016 /PRNewswire/ -- With headlines warning of a slowdown in funding for startups and discussions in Silicon Valley about a growing sense of caution among venture capitalists, the second Capital One Growth Ventures Startup Barometer focuses on how technology startups are faring and the steps they are taking to ensure their long-term success. The Startup Barometer is a semi-annual survey of technology startup business owners and decision-makers that highlights key questions and challenges facing many entrepreneurs today. The survey, completed in March 2016, examined how startup companies are growing and their views on the current dealmaking environment. According to Bloomberg, the first quarter of 2016 saw the fewest venture deals in four years, with a 12 percent decline in funding rounds since the fourth quarter of 2015. Growing caution among venture capitalists has resulted in a decline in the number of investment deals for seed-stage startups as well as the number of $100 million+ "mega" deals in the United States. "Some recent IPOs also have had a challenging go of it, which has forced many startups to scale back their ambitions and accept more strict terms from investors," said Capital One Growth Ventures Managing Partner Jaidev Shergill. "Despite all of the hyperbolic headlines about the long-term impact on the tech industry, there is still a lot of money available on the sidelines as investors play the waiting game to see where valuations stabilize. Out of necessity, VC firms are becoming more selective about where they invest, but the most promising and innovative startups will continue to be rewarded. A challenging economic climate can prove to be fertile ground for great companies who take a 360-degree view of their business and plan for the long term." The Startup Barometer found that most startup owners and decision-makers believe that it is still a positive environment for raising funds. According to the findings, nearly two thirds (64.7 percent) of the entrepreneurs surveyed cited sufficient interest and available funding from investors. Only 16.7 percent of respondents consider the current fundraising climate difficult and reported struggling to raise the funds they need, while the remainder did not sense a major shift in the environment, positive or negative. Adjusting for the Environment Tech startups often rely on theirboard members for guidance on a range of financial matters, including fundraising and budgeting. According to the survey, two in five (40.7 percent) startup owners and decision-makers have been advised by their boards to make budgetary cuts or to decrease their company's expenses at some point over the past six months. "It takes time for startups to find their footing as businesses and determine how best to allocate often-limited funds, particularly with all of the competing demands on resources as you're trying to develop a product and grow a team," said Shergill. "By working closely with knowledgeable advisors – whether it is a team of strategic investors or members of the board – tech startups can learn how to avoid some common pitfalls, particularly at a time when VCs are making fewer investments." Tech Startups Seeking Product Development Skills Customer Feedback Drives Innovation "Seeing innovation in action is what makes our work as strategic investors so exciting and rewarding," said Lauren Connolley, venture partner at Capital One Growth Ventures. "The innovation process varies widely from startup to startup, but customer feedback and testing are always a core component of the process. When Capital One Growth Ventures partners with a startup, we help serve as a conduit to teams all across the company. Startups are able to explore potential use cases side by side with Capital One teams, gather useful feedback, and test the possibilities of their product in dynamic environment." Putting Plans in Place Among those who have a business plan, nearly all include a clear mission or value statement (95.1 percent), a description of the product and how the company is differentiated in the market (83.5 percent), as well as a marketing plan and goals (79.6 percent). Tech startups were far less likely to have a cash flow statement and revenue projections (51.4 percent), which are important factors for venture capitalists to consider when deciding whether or not to invest. "It can be challenging for a startup CEO to commit a financial plan to paper when the early stages of a business can be so unpredictable and daunting," said Connolley. "While a cash flow statement and revenue projections in a business plan may not always be 'perfect,' it is helpful for investors to see that a startup team is thinking ahead and that they are considering the right factors when devising a financial plan." Additional highlights from the 2016 Startup Barometer include:
Survey Methodology About Capital One Growth Ventures Logo - http://photos.prnewswire.com/prnh/20160428/361143LOGO To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/with-a-slowdown-in-investment-deals-tech-startups-are-advised-to-cut-expenses-and-plan-for-the-long-term-300259420.html SOURCE Capital One Growth Ventures |