As global economic uncertainty increases and the prospect of a US recession is still on the table, the need for venture capitalists to be adaptable has never been greater. Gone are the days of cheap debt and generous valuations — the VC world of today is one challenged by slowing capital, changing consumer behaviors, and oversaturated markets.

New leaders in the VC space discussed these latest trends and shared their tips with startup founders as part of Columbia Business School’s Startups Week 2023 in November. In the panel discussion, they agreed the road for founders has become a lot harder in recent months but there is still hope.

“Unless you have previously sold a business or have a very specific reason, on average you’re going to be able to raise less money now than if it were four months ago,” said Christopher Harper ’20, a principal investor at Torch Capital. “But I don’t think that’s a bad thing.”

Harper explained that in the current market, founders should work backward, speaking to other founders and downstream investors to better understand how to fund the next step and then focusing on raising the minimum amount of money required to execute.

Allen Miller ’15, a principal at Oak HC/FT who focuses on early-stage ventures in the fintech space, noted that founders now have a more arduous path ahead of them as the economy enters a bear market. 

“It’s just going to take longer. You’re going to have to talk to more people. You’re going to have to be out there,” Miller said. “I think two or three years ago, the venture investors were coming to you, and they still are. But you just have to go in with the mindset that this should be hard. It’s traditionally been hard and probably will be hard in this next two- to three-year cycle.”

Allen Miller, class of 2015, speaking as a panelist member

He added that on the flip side, the number of investors has increased dramatically in recent years, meaning founders should have an easier time finding investors who are focused on their particular sectors.

With both the numbers of investors and the number of founders increasing, finding a way to stand out as a founder is more important than ever, according to Winnie Lau ’22, a vice president at BlockTower Capital. She believes that with a less forgiving market, VCs must now be more picky with founders.

“For me, the most important thing is thinking through the founder and why they’re most uniquely qualified to solve this problem and what their right to win is,” said Lau. “I think anyone can have the same idea, but how you execute it and what the founder’s ability to win in this market is what will set the deal apart.”

As for those looking to enter the VC space, Lau stressed the importance of doing one’s own due diligence when interviewing with potential funds. She noted that funds with good external images are not always good on the inside due to a negative company culture.

Alex Yagoda ’15, a partner at Future Positive, agreed it’s important for VCs to look at a business from a holistic point of view when evaluating an investment opportunity. That includes evaluating whether or not a business’s growth is sustainable, what its founders’ exit plan might be like down the road, and what an acquisition might look like. Yagoda noted that having an MBA skill set helps with this analysis.

“Where I think there’s been a greater emphasis now is valuing the business in its entirety,” said Yagoda. “What makes that interesting for CBS students and MBAs in general is your skill set has actually gotten more valuable in venture over the last 24 months.”

Going forward, the panelists agreed both the VC and founder market are uncertain. However, VCs can stay ahead by investing in companies that are addressing specific consumer pain points, as well as those that have the ability to endure a two- to three-year economic downturn.