It is now increasingly more work for startups at any stage to raise capital. The cost of capital has increased with rising interest rates, and investors are becoming more cautious.

While startups might be able to raise money with greater ease at the early stages just a few months ago, that is not necessarily true today. Multiples of revenue have come down, as have valuations. Has your business considered all sources of capital, including those previously discarded in other market cycles?

Founders need to be prepared for significant due diligence from potential investors and more investor-friendly deal terms. That is the environment we are in today, and it is not likely to change very soon.

They should also be ready to make their funding rounds last longer. This means planning very carefully and operating at the highest level of efficiency, as the next round could be more complicated than the last.

With capital coming at a higher price tag, companies must carefully look at their burn. Have easy cost cuts been implemented? Have hard choices been made? Has each project's return on investment been calibrated to cost and the timeline for delivery?

The competition for early-stage startups is fierce, and a very crowded field exists. There are a lot of startups out there looking to make their mark, and they are all vying for the same investors and customers. This makes it difficult for startups to stand out from the competition, particularly when investors are more hesitant and consumers seem to have infinite choices.

This is not a new issue, but it's amplified today because of the difficulties in securing funding. Differentiating yourself and highlighting what sets you apart is more important than ever. This is true not only when pitching investors but also when positioning your brand to consumers.

We know that regulation typically lags behind technological advances, and this can make it difficult for founders to launch their companies centered on rapidly developing technologies. A case in point has been the introduction and rapid adoption of ChatGPT and other generative AI and the need for clear legislation or regulation on the outputs. Generative AI startups will likely have to pivot to account for the regulation that is coming.

Be prepared for regulatory shifts and how those will impact your business down the road. It is critical for startups in these emerging areas to anticipate what is next. Know what is being discussed and proposed and how that might impact you moving forward. What changes will you need to make if there is a major regulatory shift in your industry?

The war for talent continues but has eased up with big-tech companies letting go of thousands of knowledge workers in the past 12 months. Some big-tech companies have gone through multiple rounds of layoffs and preach that 2023 is the year of efficiency. This is liberating talent for startups.

Startups often cannot compete with the salaries and benefits offered by larger companies. The possibility of a federal non-compete ban could make it even more challenging to keep talent nationwide.

Build a strong team from the start and have the plan to keep them. It's not all about salary and stock options, although these are important tools. As companies return to the office to retain top talent, creative methods, not just free food, will be required.

The point is to know what is important to your employees and to offer those benefits that will set you apart. Create a culture that shows your employees you care.

The startup world is constantly changing, and startups need to be prepared to pivot their business model as needed. Building a successful startup takes time and effort. Early-stage startups need to be patient and persistent in order to achieve their goals. And remember, new challenges will always be on the horizon, so try to stay ahead of what's next.

While times have gotten tougher, seed- and early-stage continue to be a brighter spot than others in venture capital. Historical data shows that investments in seed- and early-stage businesses in the most challenging times yield the highest returns. Being positive, staying optimistic, and feeling creative is the mantra of success every season.

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