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Managing your venture through a VC downturn: pragmatism, progress, and partnerships

Oct 6

6 min read

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By Paul Streater


When venture capital flows tighten, startups face their most defining test. The exuberance of growth rounds gives way to the discipline of survival. Managing through a capital downturn isn't about hibernation; it's about intelligently extending your runway while maintaining momentum toward value creation. 

The past few years have seen cycles of exuberance and retrenchment in venture funding. Today's environment, marked by investor caution, rising interest rates, and geopolitical uncertainty, demands that founders act less like dreamers and more like stewards of scarce capital. Yet, innovation remains desperately needed. As food, water, and energy pressures mount globally, the demand for transformative technologies will intensify. The key is to ensure your venture remains alive and stronger when that rebound comes. 

Focus on runway, burn rate, and core value. 


Your runway is your oxygen. Start by calculating, with brutal honesty, how long your current cash position can sustain operations at your present burn rate. Then, identify what truly drives your company's future value and cut the rest. 

Founders often resist cuts because every initiative feels essential. But a downturn forces clarity. What activities directly contribute to validating your technology, securing customers, or building defensible IP? Keep those. Everything else, especially unproven marketing experiments, peripheral hires, or over-designed office spaces, should be trimmed. 

You can't pivot from the grave. Extending your runway by six to twelve months could mean the difference between being around to raise when markets recover or shutting down just before sentiment shifts. 


Scenario planning and preemptive action 


Downturns reward founders who think several moves ahead. Build multiple financial scenarios: a base case, a "stress" case, and a "worst" case. What happens if revenue drops 50%? If your next round slips nine months? Knowing your options early lets you act from strength, not panic. 

Cut early rather than late; every month of delay erodes optionality. A small reduction made now can prevent a desperate, value-destroying move later.

 

Strengthen and leverage your IP 


In lean times, intellectual property (IP) becomes more than a legal shield; it's a store of value. Investors, acquirers, and collaborators look for assets that endure even when cash runs dry. 

This is the moment to ensure your patents are properly filed, your trade secrets documented, and your ownership structure watertight. Strengthen your IP portfolio strategically: file continuations, refine claims, and explore whether some patents could be licensed or co-developed to generate income. 

If the worst happens and you must consider a sale, robust IP dramatically improves your negotiating position. Acquirers often value protected know-how far more than early revenues. In a downturn, IP can become your most liquid asset if it's well managed. 


Collaborate to multiply strength. 


Scarcity breeds creativity. In challenging times, competitors can become allies. Collaboration and even mergers, once seen as desperate acts, can now be rational strategies to consolidate market presence, pool technology, or expand distribution. 

If two startups are burning parallel piles of cash to reach similar customers, combining forces can double their market credibility while halving fixed costs. Such moves require humility and trust, but they can transform survival into a strategic advantage. 

Similarly, partnerships with established corporates can be a lifeline. Big companies are often more open to joint ventures during downturns, when they, too, are looking for innovation at lower cost. Offer equity participation or long-term IP access in exchange for R&D support, pilot programs, or market access. 

Innovation ecosystems thrive on connectivity, especially when capital is scarce.

 

Be pragmatic about traction and revenue. 


In bull markets, investors reward potential. In bear markets, they reward proof. The luxury of "growth before revenue" evaporates when capital tightens. Now is the time to find paying customers, even if the deals are small, pilot-based, or at lower margins. 

Demonstrated traction is the single best fundraising asset you can have in a downturn. It signals product-market fit, reduces perceived risk, and can even make your startup self-sustaining. 

Be pragmatic: if a customer wants customisation, consider it. If early adopters request a service layer to accompany your product, explore it. Purity of vision matters less right now than survival and validation. 

Cash flow, however modest, keeps the lights on, and proves your relevance. 


Rethink cost structures and employment models. 


The hardest conversations founders face involve people. But preserving the company's life often means reconfiguring how work gets done. 

Consider shifting from full-time to part-time roles or flexible contracts. Many talented professionals, especially in uncertain times, prefer project-based work for stability. You retain access to their skills without carrying full salary overheads. 

Similarly, renegotiate with your advisory board. Many advisors will understand the climate and may accept equity adjustments, reduced retainers, or performance-linked compensation. Transparency and gratitude go a long way here. 

Your goal is to maintain progress with a leaner, more adaptable structure, not to hollow out your capabilities. 

Convert fixed costs to variable costs wherever possible. Shift from long leases and retained services to pay-as-you-go cloud infrastructure and milestone-based vendor contracts. Flexibility is the new security. 


Use equity creatively 


When cash is precious, equity becomes a powerful currency. Strategic partners, suppliers, or consultants might accept partial payment in shares, particularly if they believe in your long-term potential. 

For R&D collaborations, this can be especially effective. Offering a small equity stake in exchange for lab access, joint research, or prototyping support can keep development on track without draining your balance sheet. The key is to structure these agreements with clear milestones and vesting conditions so that both parties remain motivated. 

Be judicious; dilution is permanent, but don't be dogmatic. Well-placed equity can buy you time and momentum. 


Explore non-dilutive capital 


Don't assume venture funding is your only lifeline. Grants, R&D tax credits, government innovation programs, and strategic industry partnerships can inject meaningful capital without giving up equity. 

Many public and corporate funds are designed precisely for times like these, when markets falter but innovation must continue. A disciplined CFO or advisor should continually map available programs across your sector and geography. 


Keep investors close and honest. 


In a downturn, your existing investors become your most critical allies. Even if they're not deploying new capital, they can open doors to partners, customers, or follow-on funding. But they need confidence that you're managing the situation proactively. 

Communicate regularly and candidly. Share your revised financial models, explain your cost-control measures, and articulate the path to either breakeven or strategic inflexion. Surprises destroy trust; transparency builds it. 

If you do need to raise a bridge round, investors are far more likely to support founders who've demonstrated fiscal discipline and adaptability. 


Resilience from the inside out 


Downturns test not just business models but character. Teams look to founders for signals; panic spreads faster than confidence. 

Lead calmly. Celebrate small wins. Reinforce the mission. Remind everyone that the purpose of your company, to solve real human problems through innovation, remains undiminished by market sentiment. 

Build a "survival culture" without losing morale. Share key decisions transparently, and involve your team in identifying savings or efficiencies. People support what they help create. Aligning incentives around shared sacrifice, temporary pay cuts or deferred bonuses tied to future success can unite teams around a common goal. 

Resilience isn't just financial; it's cultural. A team that stays motivated through hardship will outperform one that was only ever driven by abundant funding. 


Positioning for the rebound

 

Economic cycles always turn. The same market forces that are constraining capital now will soon create fresh demand for innovation. The question is whether you're ready when they do. 

Keep nurturing relationships with investors, corporate partners, and potential acquirers. Even modest updates keep you visible. When the market thaws, decision-makers move quickly, and they fund ventures that have shown both discipline and momentum. 

Track recovery signals: IPO activity, corporate R&D budgets, and renewed fund announcements. When these indicators start moving, accelerate your business development and fundraising efforts. 

And document everything. When you next raise, be ready to show not just that you survived, but that you became more efficient, creative, and commercially validated in the process. 


Lead with calm and conviction. 


As a founder, your greatest asset is composure. Every downturn ends, but how you lead through it defines your company's trajectory. Stay close to your customers, protect your innovation core, and manage capital with rigour. 

When the world turns again, and it will,the ventures that endured with purpose and discipline will emerge not as survivors, but as leaders. 


In conclusion 


Managing a venture through a capital drought requires a shift from ambition to discipline, from growth to endurance. But make no mistake, this is still progress. 

Extend your runway, strengthen your IP, deepen collaborations, and pursue revenue earlier. Use equity strategically, recalibrate costs, and lead transparently. Seek partnerships that stretch resources and build cultural resilience to withstand volatility. 

The downturn is not an end, it's an opportunity to refine what truly matters. When markets thaw, those who survived with sharper focus and stronger fundamentals will not merely recover. They will define the next wave of innovation.


 

 

About the Author: Paul Streater is the Chief Operating Officer at Accumont, a global food and agriculture innovation consultancy, and an Operating Partner at Natural Ventures, a food and water security investment fund. He leads strategy, investments, acquisitions, and investor networks for clients worldwide. Paul serves as a board observer to several ag-innovation companies and advises on food and agriculture for the Abu Dhabi Sustainability Week. He writes at the intersection of capital, technology, and climate-resilient agriculture. 

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