While the venture capital market boomed last year and start-ups received record sums, the market has shrunk significantly since the beginning of this year. The main reasons for this are the war in Ukraine and rising interest rates.
These events also have Impact on venture capitalists who have become wary of venture capital and have realigned their requirements for start-ups.
Robustness and economy are in the foreground
With a particularly large supply of private equity capital, the financing conditions for start-ups were particularly attractive last year. This was almost three times that of the previous year.
However, these times are over now, because start-ups that need financing and apply to investors for venture capital funding have to change their business model adapt to new market conditions. Because venture capitalists are currently investing more cautiously and are examining possible investments even more thoroughly as part of due diligence.
The priorities of investors have also changed and adapted to the current situation. Because venture capital providers are currently no longer just relying on rapid company growth, but are also focusing on criteria such as start-ups Robustness and economy. Investors are particularly interested in the cash burn rate (external link). This is the rate at which startups consume the capital provided.
Courage could, however, help the start-ups robust development of the investment volume in the first half of 2022. In essence, start-ups have so far been able to realize many successful rounds of financing in 2022. In terms of deal volume, the first half of the year was the third strongest in the German venture capital market.
This development shows that many start-ups manage to be attractive to investors despite the current uncertainties on the market.
Venture capital is a popular form of financing
With venture capital financing, young companies receive money to finance their business idea and in return give up shares in their company. The investors thus become co-owners of the company foundation.
The start-up is often financed in different company phases, in which the financial resources are made available as part of capital increases.
Consider alternatives to venture capital
Business founders should therefore note that they cede part of their company when financing with venture capital. This contributes to changing shareholder relationships. Therefore, entrepreneurs should consider other ways of raising capital to start a business.
Alternatives to venture capital can be subsidies or promotional loans or other types of financing. You can use our free funding check to find out which funding is right for you.