Those days ended with a series of significant blows to the ecosystem including the Silicon Valley Bank collapse, global wars and rising interest rates.

Now the industry has settled into a new, healthy normal where valuations have returned to reasonable levels, only the highest-quality startups are able to attract significant capital, due diligence has come back into vogue as investors slowed down, and capital efficiency is again the name of the game for startups.

Glimmers of hope have emerged: Global markets have held, IPOs are thawing, crypto has rebounded and AI is booming — all signals of renewed investor interest.

As the doom and gloom continues to subside we are all wondering: What is the Goldilocks scenario that investors and founders are hoping for?

Investor sentiment

I spent the past few weeks learning what other venture investors think this outcome would require. I discussed this with Courtney McCrea and Matt Cohen, managing partners at Recast Capital and Ripple Ventures, respectively, to understand if other fund managers share my optimism.

“The ecosystem needs liquidity. IPOs need to begin happening again, interest rates must come down, or public markets need to grow. Any one, or ideally, all of these things, need to start happening for the venture ecosystem to rebound,” McCrea told me. “Venture capital is all about the long game, so some patience will be required.”

The general consensus is that first and foremost, IPOs need to start happening again, and recent signals from Reddit and Astera Labs indicate they might.

The liquidity events brought by IPOs are the lifeblood of venture, and once venture investors across all stages start getting capital returned, they can return capital to LPs, create new funds and make new investments across the startup ecosystem.

As that foundational cycle continues to show more strength, the momentum of the ecosystem increases and another cycle begins.

“Fund managers are seeing some long awaited signs of life from the market, despite the myriad of headwinds. Startups are getting more efficient and profitable while a great deal of froth has been removed from the market. There’s a palpable sense of optimism emerging that the Goldilocks scenario might just occur,” Cohen told me. “Whether it materializes has yet to be seen, but I’ve seen more optimism emerge in the last month than I did in the last year.”

Reaching Goldilocks

Inevitably, the most crucial piece of this puzzle is the interest rate and macroeconomic climate. If global markets are able to avoid a recession and interest rates are able to be managed in a way that fosters continued growth under tighter monetary controls, then institutional capital will once again flow toward growth.

In a world where IPOs are consistently rolling and fund managers are showing strong performance, the venture and startup ecosystems will be in the Goldilocks scenario.

It’s a uniquely interesting time to invest; the scales seem evenly matched and maybe even slightly optimistic.

This is a prime time to invest, because we may be witnessing the beginning of a renewed bull market. The risks, however, remain persistent with global turmoil continuing to spread.

The conflict in Ukraine remains protracted and new conflict has arisen in Israel. Interest rates are flattening, but remain elevated relative to the previous cycle.

But global markets have remained resilient and a definitive turnaround there — combined with a few more successful IPOs — could provide directional confidence for investors over the coming months.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

Despite small glimmers of hope, the market turnaround has not yet materialized, putting startup founders in a challenging position as they decide how to optimize resources.

The vast majority of the founders I talk to are focusing on slashing costs to extend their runways — they’re in survival mode. While this is certainly the default option, there are drawbacks to it, and I’m not seeing enough founders pushing to consider the viable alternatives.

Survival mode

In times of uncertainty, it’s a natural response to want to play things conservatively. Slowing expenditures and even cutting staff to add six, 12 or 18 months of runway may seem like the way to accomplish that aim.

Trouble is, at that point you’re trying to time the market so it turns out that what you’re actually doing is something of a gamble. Maybe you’ll be able to wait things out and still have enough left in the bank to come roaring back to life when markets turn around, making a fresh fundraise more feasible.

But maybe you’ll just wind up fizzling out.

Here’s the thing: Not only does your bet on the timing of the market rebound need to pan out, you’ll also need to have enough resources left to ramp back up into growth mode, develop some traction, and then hopefully be able to impress enough VCs to raise that next round. So long as you’re taking risks like this, you should also consider a bolder play: growth.

Growth mode

Sometimes it pays to be contrarian. While nine out of 10 startups go into hibernation, there can be big opportunities to conquer your market vertical. Look at your competitors. Are they actively marketing? Are they winning new customers? If not, this could be your chance.

Rev up your sales and marketing engines, ship new products, bring in some new customers and boost your ARR. Yes, there are costs involved, but pull this off, and your company will be far more attractive to VCs.

Right now there are far too few startups still growing, and if there’s anything that VCs like it’s growth — even better if it’s 2x to 3x ARR growth, and you’re taking strides to corner the market you’re in.

Bootstrapping mode

The final route that’s an option for some startups is to dial back on the costs of hyper-growth and focus on developing an efficient, profitable business.

I’m always looking for startups with business models that actually work. At the early stage so many companies are trying out ideas that may never have a path to profitability.

Granted, if you’re still small and profitability doesn’t mean eye-popping growth, you should temper your expectations of raising a fresh round of funding.

On the other hand, if you’re trying to play things conservatively, bootstrapping can be an even less risky path than going all the way into survival mode. When you’re profitable, you don’t need to live off of your runway.

The question really is: Will you be able to remain competitive when the rebound spins out freshly funded, hyper-growth-chasing competitors?

Each of these paths has its share of risks and upsides. Which one is right for your startup is contingent on a number of factors: How much cash you have in reserves, what your competitors are doing, what your path to profitability looks like, and much more.

The bottom line is that founders do have options beyond cutting costs and extending their runways, and they’d be wise to consider them.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

I’ve said it before and I’ll say it again: Over the course of their careers, LPs have maybe two to three windows to buy at the bottom. Our current market is one of them.

We’ve all seen stories about how LPs are shying away from venture in the wake of macroeconomic trends, war, interest rates — the list goes on. The saying, “Those who fail to learn from history are doomed to repeat it” rings especially true in our current climate, and the window for LPs to nail one of those two or three career bottoms is beginning to close.

This opportunity does not come without risk, which is why those who capitalize on these moments are celebrated in history and why most miss it. It takes enormous courage and conviction to deploy capital in the face of headwinds like we’ve seen over the past year. But for those who invest on 10- and even 20-year time horizons, the question really boils down to: “Do you think technology will continue to be the most profitable and disruptive sector over our lifetimes?” If your answer to this is yes, now is a uniquely rare time to invest in the fund managers you think are capable of identifying the companies driving this trend.

As history has shown, it’s easy to invest when the market is booming and IPOs are flowing out like champagne in a nightclub. Ironically, many investors get crushed investing at the top when things seem most easy and obvious. Investing is all about timing, and those who have seen this cycle repeat tend to also be the most keen to lean into the risk presented by our current economic climate. Don’t get me wrong, it still remains to be seen when the official turnaround will come — but by the time that clarity is recognized, the opportunity will have passed.

LPs and investors of every variety are in a game of chicken with that slowly closing window. If history is any indicator, that turnaround will eventually arrive and the primary function driving capital deployment decisions is all about how close you want to cut it. History has also shown us that the window closes quickly and leaves many trapped — forced to decide between waiting for the next cycle or being forced to buy late and at prices they well know to be elevated. This is no easy task, especially when you’re beholden to boards and decision-makers that expect perfection.

My message to LPs is this: How close are you willing to cut it? If you’re really investing on decade time horizons, then it seems like you’d rather get through the window now and potentially weather a year or two (or less) of patience. The alternative is being late to the party and chalking up below-average returns as an investment in the wisdom to not make the same mistake a decade from now when history inevitably repeats.

Related reading:

• VCs Who Wait Too Long For A Market Rebound Risk Losing Out On The Best Deals

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

The ongoing downward trend in venture funding has many founders desperately trying to secure their next round.

Runways are running out, and many great startups with strong businesses and future prospects are willing to take a hit on valuations, and even take a downround, in order to continue operating.

Venture funds, however, are waiting for the directional resolution needed to not only feel confident in the market rebound but also to provide their limited partners with a sense that deploying fresh capital into venture is the right move.

Currently, everyone seems to be in a holding pattern waiting for this resolution.

Don’t wait too long

If history has taught us anything, it’s that oftentimes this resolution emerges after many of the best opportunities have been taken.

I believe that over the next six to 24 months, many of the venture deals that will go down in history as legendary will be made. As investors, it pays to be early — and that means deploying capital right before the market has directional consensus.

The difficulty for investors will be managing the risk of making investment decisions just as — or ideally just before — positive directional consensus is reached. Once that moment happens, investors will begin piling back into the market, driving prices, valuations and competition for deal flow back up.

The sweet spot to make once (maybe twice) in a lifetime investments is coming up on the horizon, but with runways for many startups reaching their ends, the decision-making process for investors will become increasingly scary.

Many factors could contribute to this rebound — or derail its possibility completely. The Ukraine war ending peacefully or the monetary policy soft-landing being confirmed could turn the tide of the markets overnight.

However, the opposite could very well happen and we could be in for a deeper, more protracted downturn than anyone anticipated.

Investors are obviously tracking these dynamics closely and monitoring the herd for directional agreement, but for the time being, many investors are stuck on the fence.

Until venture funds and their LPs start deploying capital again, the clock will continue to count down and many otherwise good startups will reach the end of their runways and close up shop.

A great many startups will reach that point over the next six months, so investors are running out of time to reach that directional consensus. If the macroeconomic landscape doesn’t provide some sense of clarity within that timespan, then VCs and their LPs will be between a rock and a hard place — either deploy capital to keep some portion of their portfolio alive, or accept a significant (potentially fund-crippling) number of failures.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Related Reading:

• Bootstrap, Sell Or Recapitalize? A Tech Entrepreneurs’ Guide To Surviving A Capital Crunch In A Downturn
• ​​What Does ‘Dry Powder’ Actually Mean For Startups?
• How Founders Should Manage Burn Rates During A Recession

Illustration: Dom Guzman

Managing burn rate is a critical aspect of running a startup, especially in a recession or protracted economic downturn. The market has shifted and so have investors’ expectations. It’s no longer a game of growth at all costs — sustainability, profitability and efficiency are the new key performance indicators catching the eyes of investors.

This change means that founders need to focus on burn rate now more than ever, so I’ve put together my thoughts on how to manage your startups in today’s economic climate.

What’s your break-even point?

First and foremost, founders need to have a clear and realistic financial plan. This includes having a detailed understanding of the startup’s current financial situation, and projecting future financial needs based on different scenarios. Startups should also have a clear understanding of their break-even point, which is the point at which the startup is able to cover its costs and generate a profit. By understanding the startup’s break-even point, the company can better manage its burn rate and ensure that it is able to generate enough revenue to cover its costs.

A key component of that plan is cash flow management. The ability to monitor and manage the startup’s cash balance ensures that bills are paid on time and provides an accurate perspective on when new funding will be required to continue operations. Given the constraints of this cash flow management plan, a refreshed and resilient take on the business model can be created. This includes finding ways to diversify revenue streams, building a strong and loyal customer base, and developing a business model that is scalable and sustainable.

Planning for future growth

Startups should also consider developing a strategic plan that outlines how they will navigate the recession and position themselves for future growth. If fresh venture funding will not be available for a year or two, founders need to actively seek out new sources of funding. Implementing a line of credit while the balance sheet and revenue are strong is a good first step, but other forms of short-term financing such as venture debt should also be considered.

Communicate clearly

Finally, it’s important for startups to have clear and open communication with their investors, employees and customers during times of uncertainty. This includes keeping investors informed of the startup’s financial situation, explaining any cost-cutting measures that have been implemented, and providing regular updates on the startup’s progress. Founders should also be transparent with their employees about the challenges they are facing and how the company is working to overcome them.

In conclusion, how founders manage their startups burn rate is essential during times of economic uncertainty. Startups should concentrate on executing cost-cutting measures, having a clear and realistic financial plan, focusing on cash flow management, building a strong and resilient business model, and having clear and open communication with their investors, employees and customers. By implementing these strategies, startups can increase their chances of success during a recession and position themselves for future growth.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

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The recent slowdown in venture funding has shifted the way founders are approaching VCs and vice versa. Deal flow has slowed dramatically and VCs are being especially mindful around what investments they choose to make and why.

Only a few months ago, founders were raising at a frantic pace (and spending that way too). Now, the focus has shifted from growth to preservation, and funding is being used to shore up balance sheets and extend runways for at least two years. For startups that happened to time this cycle poorly, their founders are faced with difficult propositions and challenges.

My advice to these founders is it’s better to take a down or flat round in order to withstand the recession that is likely coming. That comes with a lot of consequences, so in the very worst case I advise founders to “fail gracefully” so they’re able to preserve their investor relationships and start preparing for the next wave.

The news headlines seem to reflect some of the opposite dynamics — the deals are continuing at a rapid pace and startups are able to secure continued funding. This is only partially true. VCs are triaging their value drivers, so the deal flow we are seeing is from VCs looking to protect their portfolio darlings by allocating enough cash to extend their runways and ensure their longevity. In classic VC fashion, these rounds have created a gravity that funds “standing by the hoop” wish to follow.

So in some sense, yes, deals are continuing but the broad allocations that were commonplace just a few months ago have come to a grinding halt. This has created a tale of two cities for startups; those which VCs wish to protect remain insulated with strong runways while all of the other startups on the roster are left with few options. Over the last few months we’ve seen many of the portfolio winners secure that protection, so most VCs are now in “wait-and-see” mode before reshifting their focus to new deals.

What’s ahead

If positive signs in the economy take more than six months to a year to manifest, we are going to see significant desperation in the market as startups start running out of cash. There might be a sweet spot window in there for VCs if that desperation closely coincides with an economic turnaround, but whether or not that comes to fruition remains to be seen.

If we experience a protracted slowdown, I expect to see layoffs and an increasing number of startup failures as cash runs out and VCs remain unready to deploy fresh capital into new deals. With their winners insulated, they may be incentivized to let portfolio companies on the fringes fail in order to preserve their capital for the next sign of life from the economy.

Like every VC, I hope we don’t see that day come, but it’s possible. The most likely scenario is that we see a brief window where great startups are on sale and the smart VCs are able to step in and secure lucrative equity at a deep discount. Historically, this is where the best VCs have risen to the top.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

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The best VCs identify and support the world’s best founders. This is at the core of what they do.

Creating and growing a startup to scale is an extremely difficult task that can be derailed by a myriad of circumstances outside of a founder’s control. So even when great founders fail, the best VCs are waiting in the wings to support their next idea.

The U.S. has an extremely positive mindset toward failures like these, but that same appetite for risk and the celebration of attempts at creating big ideas doesn’t exist in the same way in most of the world.

In Silicon Valley, startup founders who fail gracefully are celebrated as heroes — people who have bravely attempted the impossible. Their failures aren’t seen as personally attributed negative marks on their records, but rather learning experiences that will inform and enable them to be successful on their next attempt.

However, in Europe, Canada and other huge markets, these failures are viewed in a more embarrassing light that can stand as valid reasons to withhold capital from failed founders.

This perspective gives U.S. founders and investors a distinct edge and is responsible for some of the smashing successes the U.S. market has seen in every industry across the board.

From adversity to opportunity

With the sense of a significant downturn looming, there will undoubtedly be many startups that won’t achieve their vision in the coming years. It’s my belief that this represents a generational opportunity for founders and investors alike.

As the availability of capital diminishes, there will be many great startups that simply won’t be able to secure the funding needed to continue their operations. While this short-term pain will be felt by both founders and investors, it also represents a much-needed refresh of the cycle.

This refresh will unlock time for some of the most promising founders to go back to the drawing board with the wealth of earned experience needed to inform and create an even better company, product or service. For investors, this refresh will change the dynamics of valuations and opportunities in a way that presents uniquely valuable, once-in-a-lifetime opportunities to invest in great founders early and at extremely attractive valuations.

In the short-term it will be painful, make no mistake. But great VCs think on long time horizons and, for the last decade plus, great valuations in great startups led by great founders have been difficult (if not impossible) to come by.

And the winners are?

With the coming refresh, fund-changing valuations will present themselves again and the next generation of marque venture funds will be born out of this cycle. The major factor in deciding which funds will come out on top will be their willingness to lean into the risks and maintain focus on the long-term prospects of the coming cycle.

Having a strong portfolio of great founders is the key to unlocking this potential. So as failures begin to mount, VCs should be ready to back the founders they believe in most, even if those founders have earned a failure or two … or three.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

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Small entrepreneurs never thought much about the supply chain before the pandemic threw the world into disarray. 

Now, that’s all they think and worry about. And while investors have sunk over $7 billion into supply chain-oriented ventures so far this year, there’s more work to be done to bring solutions to life and to market.

My family established a small food market in Toronto’s Little India neighborhood in 1981 shortly after immigrating to Canada. My three siblings and I helped my parents run the store, learning the basics about operating a business as we went along. 

Our market specialized in importing Indian food products and dried fruit and nuts from abroad. In doing so, it was our first modest foray into developing and managing an international supply chain. My parents put me in charge of this for a time as a teenager. It required monitoring and scheduling payments, but the supply chain worked efficiently with paper orders and invoices and the odd phone call — kind of like magic. 

I left the store to study computer science and embarked on an exciting career in software engineering. Not long ago, however, as my father was preparing to retire, I learned that the supply-chain planning process had not changed. It was essentially run the same way as when I was still working there, except with the odd spreadsheet and email exchange. 

To me, there seemed to be a great many opportunities for growth that were lost to fear of modernization. Much of this was rooted in discounting and ignoring the role of logistics in growing a business. 

This was all before the pandemic, of course. 

The post-pandemic retail world

Since 2020, owners and operators have faced a whole new set of disruptions, only one of which is the supply chain. If you survived or launched in the pandemic, you already know the pre-pandemic rules of managing growth and scaling up are obsolete.

One of the great transformations of pandemic-era retailing and services is the rise of e-commerce. In 2021, over 27 million Canadians were regular e-commerce users. That’s nearly three-quarters of the population. Canadian consumers are spending over $3 billion a month through e-commerce, led by the fashion sector, and that is expected to rise steadily until 2025. 

A growing number of these e-commerce transactions are flowing through small to medium-sized businesses. To accommodate them and gain more customers, these businesses must focus intensely on two pillars: Making sure customers get the goods and services on time, and making their e-commerce platforms bulletproof to hackers and tech hiccups.

Inventory management and demand planning

Customers are still spending, and companies are still pivoting to meet their demands. A key piece of the puzzle is improving planning through inventory management and demand planning to make sure your brand grows in the channels that are right for you, even through tough times. 

New sales channels bring new overhead and stress. 

Companies like Amazon have the capacity and staff to adapt to new business and sales environments. New e-commerce businesses launched during the pandemic such as designer clothing, protein bars and kitchenware, do not. 

There are solutions to the great supply chain disruption of the 2020s for small businesses, and they are simpler and more accessible than owners may think. 

My company Moselle, for example, has developed a suite of data analytic tools that provide inventory planning and demand management to entrepreneurs. The role of these tools is to determine how much product to order, when to order it, and to automatically place the order. This allows businesses to manage administrative challenges like scaling up their supply chain.

The overarching goal: to provide SMBs with technology, data and support to scale up their supply chains efficiently — giving owners, operators and managers more time to create, market and sell. 

The bottom line for any company in e-commerce (and, frankly, commerce) is the need to surmount massive challenges to manage supply chains — predict product shortages before they happen and scale it up rapidly — in order to manage SMB headaches and challenges. The best way to manage a supply chain is through accurate, rapid information that is available to managers when they need it. 

With the data collection and user-friendly dashboard to keep tabs on the supply chain, entrepreneurs will be liberated to focus on new products and channels. Like imported dried fruit and nuts sold as gifts via an online store.

Lakhveer Singh Jajj is the founder and CEO of Toronto-based Moselle, a digital platform that helps businesses streamline the sourcing, ordering and scheduling of goods from suppliers.

Illustration: Dom Guzman

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Many of the leading, household-name VCs earned their reputation (and their returns) by investing during the 2008 crisis. Startup valuations were lower, giving VCs great terms to invest, and amid a macroeconomic slump founders were envisioning and building a whole new future. This included ridesharing (Uber, Lyft), messaging that finally improved upon email (Slack), and much more.

Some of the companies they funded at that low went on to be multibillion-dollar, behemoth publicly traded companies over the following decade. It was the best-case scenario as far as those investors are concerned, and their willingness to invest in the face of a recession and economic collapse generated returns that have secured their places in VC history.

History repeats itself, and I think we are on the verge of this story repeating itself. The entire essence of venture capital is to invest on long time horizons in paradigm-shifting companies. If you’re able to do that at a discount during downturns, your returns can be accelerated dramatically.

Boldness wins

Right now, many economists are predicting a recession lasting through 2024. At the same time, there are many VCs that recently raised new, large funds and have plenty of dry powder to deploy. With startup valuations coming down from the stratosphere, many of these funds are waiting for their moment to step in and secure significant equity at a discount. When this moment will come we don’t yet know, but if history is any indicator–it’s on its way. If you have a ton of dry powder, this can be the time to place big, majority shareholder bets that will be massive home runs over the next decade.

If you’re a fund trying to keep powder dry, this is a great time to dollar-cost average. Corporate earnings are definitely going to take a hit, but their budgets and need to compete on technology will remain intact, and even potentially elevated.

The economic boom of the past decade-plus has created enormous value and wealth for the world’s largest corporations, and they are all actively seeking opportunities to outcompete using software, Web3, proptech, energy and other startup verticals where innovation is blooming.

Early-stage survival

There are many companies in the seed through Series B phase that are well positioned to survive (and potentially even thrive) as the labor supply opens up and competition diminishes. Many investors have already created their shortlist of these companies and are waiting to pounce when the moment is right.

These investments will be their marquis positions moving through this downturn and into the next wave of growth, high valuations and froth. Instead of chasing the hottest deals, they’ll be able to sit back and watch their positions grow into mature, highly profitable companies that have proven their ability to survive the worst the global economy can muster.

Despite the volatility, fear and risk that is coming our way, those things represent opportunity to keen investors. This cycle has repeated itself many times and there’s no reason to think this time will be different.

As an early-stage VC, I feel all of those concerns deeply, but I’m also excited for the potentially generational opportunity they present. As investors, how many of these chances will we get during our lifetime? Maybe two or three?

They cannot be squandered, and there’s no doubt that the best investors will capitalize on them the way they always have. Sure, many funds and many startups will fail, but those that are able to position themselves well into this coming cycle will be the next a16zs and Sequoias—I plan to be among them.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

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As an early-stage venture capitalist interested in enterprise SaaS startups, I often get this question: “What’s the minimum needed to secure pre-seed venture funding?”

Recently, we’ve seen investors move earlier—investing in startups that oftentimes are nothing more than an idea and a logo. Growth-stage investing is collapsing before our eyes, and it’s pushing more and more VCs toward early-stage startups.

This migration has been good for founders, but it’s also created an enormous amount of froth, competition and valuations that are, frankly, ridiculous.

So, if you’re a founder looking to launch a startup into these favorable dynamics you might be interested in learning what exactly pre/seed-stage VCs consider the minimum needed to write the check.

The magic ticket

The first and most important thing VCs assess is the founder. Founders must have a unique viewpoint on a niche area of the tech ecosystem. That could represent a wide range of ideas, industries, etc., but it must be unique, show obvious value and be an executable vision. Even if your company is nothing more than an idea and a logo, the vision must be something that’s clearly articulated.

Founders must be able to share this vision in a way that is easy to follow, makes sense and has a clear path to scaling into a real company that adds value. Even if that roadmap is many years long, founders must be able to explain where they are now, what they need to get from point A to point B and eventually to points C through Z.

This roadmap should include expected hurdles, resistance points and expectations on growth and impact. For technical founders, this might be a bit easier because the product roadmap is easier to identify and build.

After assessing and believing in that vision, VCs will want to look at the founder’s background. Previous startup experience is hugely beneficial for obvious reasons, and network validation is a close second—especially for first-time founders. I’ve discovered that founders with extremely solid networks have other proven people who can vouch for their ability to execute. For first-time founders, this is essential.

Even once a VC is sold on your vision, they’ll want to assess your ability to execute. Having people who have proven their ability to do this in your corner is essential. If a VC sees someone they know is capable of building a company singing your praises and believing in your ability to operate on their level, they will invest with confidence. Quantitative metrics, industry expertise and experience can only persuade VCs so far; they rely heavily on the people they trust to signal which founders have the right stuff and which do not.

Startup storytelling

All of this can be surmised into the most important quality founders need to secure early-stage funding: storytelling. Before there’s a product and a sales team, there has to be a story that people can rally around. Oftentimes, VCs will be assessing the storytelling of a founder through the lens of a customer, other investors, employees and advisers. Can this founder convince all of these stakeholders that their vision is solid and that they’re able to deliver on the promises they are making?

This storytelling isn’t just product-focused either, it’s about combining the personal life experience of the founder into the ambitious vision and eventually tying it all into the product roadmap. Succeed at sharing that compelling vision and sprinkle a bit of network validation on top, and you’ve got a recipe for raising early-stage venture funding.

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman

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