Founders are worried that the current startup funding environment will affect young companies and make it difficult for them to secure funds critical to their survival and growth.

An easy money environment often leads to excess. It causes companies to overspend and overextend themselves. The dominant theme in such situations is growth. Consolidation, building systems and processes, and developing and focusing on conservative prudential management are given a back seat. Long-term business sustainability requires businesses to adopt conventional financial practices. The massive downsizing of the workforce and loss of thousands of jobs at Twitter is an example of the cost of financial excess. The terrible time that many Indian startups like Nykaa, Policy Bazar, PayTM, Zomato, and Byju are going through is all a result of excessive focus on growth and failure of financial management.

Many young companies and others whose prime focus was on achieving higher and higher valuations that would enable them to acquire more and more funding at low cost are now in for a rude shock. It is a godsend lesson for these companies. Sustainable businesses are built on conservative financial and business management practices. Look at all those businesses that have thrived and continue to thrive over generations. You would notice this trait in all of them. Walmart in America and Tata in India are two such examples.

Young enterprises and startups who need capital fear that today’s relatively tight money environment will make it difficult to secure finance. I will point them to Airbnb, a startup born in the throes of severe financial constraints. The capital was scarce, and there were few takers among the investment community who wanted to invest in a sharing economy-based enterprise. The founders’ grit and determination helped them convince investors to invest in their startup.

The company is today now a thriving and fast-growing business. It focuses on conservative financial management. It is customer-centric, and it continues to innovate. Focusing on reckless growth and achieving enormous valuation does not mean the enterprise is hugely innovative. It just means that it is being badly managed. Startup funding and business growth are outcomes of sound business strategy, business model innovation, marketing strategy, and innovative marketing.

Supporting certifications:

Business strategy

Business model innovation

Marketing strategy

Digital marketing

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Sudhirahluwalia, Inc