Everyone has their role to play when supporting founders.
The last few years have proven to be quite a wild ride for local startup founders. In 2020, the pandemic and the area’s civil unrest took what felt like a sustainably growing startup ecosystem and brought it to a screeching halt. Moments later, a boost of government funding and personal savings whiplashed entrepreneurs from a standing start to a full-on sprint. Funding was plentiful (for many) and terms were as generous as we will see for the next decade. But just as founders were putting their early-stage funding to work, inflation kicked in, sucking the air out of a funding bubble. Investment terms started shifting in favor of the investor by mid 2022, and just as teams were rightsizing their budgets, the bank that powers the innovation economy—SVB—disappeared overnight along with the funds of many local startups.
It sucks being an entrepreneur sometimes. But you know what? They’ll figure it out. They always do.
The entrepreneurial spirit is alive and well in Minnesota. I saw it walking around Twin Ignition last week as the most recent BETA Cohort kicked off its programming. While the rest of us sweated about another bank failure, 20-ish early-stage startups got together to share their enthusiasm for the way they’re about to change the world, God bless them. We should all live life with that gusto.
Not everyone wants to, should, or can start a company, but we can all play an important role in the success of the area’s startup ecosystem. And that’s exactly what we need to do right now, especially as the headwinds push more entrepreneurs to the brink of exhaustion.
To the Customers
Keep buying. The most important thing all of us can do is to continue (or to start) buying products and services from local startups.
“But Reed, doesn’t that require sacrificing the quality or variety of what I need to buy?”
No! You can find a quality version of almost any widget made in the global economy right here in Minnesota. Need sneaker insurance? Check out SoleSafe. Want to dial up that bland dinner? Grab a bottle of Maazah from your local grocer. Leaky digital subscription issues? Plug your churn with ProsperStack. Your consumption provides immediate cash while boosting the metrics that will help local teams raise additional capital in their next rounds of financing.
To the Investors
Keep investing. That’s what we’re doing at Groove Capital. If you’ve gone through other downturns, you know that what we’re experiencing now has the potential to be some of the best early-stage vintage investing since 2008 or 2009. The knee jerk reaction is to shore up and ride out the storm. I get it. But that approach leaves founders stranded and takes you out of the game just as the terms are starting to swing back in your favor.
To the Mentors and Advisors
Keep advising. Many first-time founders have been building their companies in a bull market and have never navigated their business through a downturn. You have. As many startups cut spend to extend their runways, your experience is especially valuable. This is your chance to be that unflappable sage who comes in, reduces anxiety, increases focus, and helps our founders chart the course they will need to take to get back to calmer waters.
To Service Providers
Keep providing your services. If founders are going to continue to build, they are going to need your help now more than ever. Spending cuts likely mean fewer people to do the work. Get scrappy. Be Proactive. The “set it and forget it” approach is not going to work now. They need you to look out for ways to save them money while maximizing ROI. Now is not the time to raise your rates. Instead, your job is to backfill the gaps, be incredibly efficient with your work, and drive outcomes. As you do this, you’ll make a partner for life. Founders remember the attorneys, marketers, insurers, accountants, bankers, and others who were there with them in the trenches and reward them with their loyalty for life.
To Corporate Sponsors
Keep sponsoring. This ecosystem is rich with entrepreneurial support organizations (like BETA, Minnestar, MN Cup, Launch Minnesota, Lunar Startups, Black Tech Talent, Techstars, Medical Alley, and more) that train founders while helping them establish critical relationships with customers, investors, mentors, and more. But as corporate marketing budgets shrink, so too does our community’s ability to support new. For those who manage these budgets, I encourage you to keep it local, continue your sponsorships, and fight for the future of Minnesota's startup ecosystem.
The long-term success of this community’s startup ecosystem rests on the backs of our founders. In the face of adversity, they need less advice and more of our time, attention, and money. We all have a role to play. Right now, that role is to lighten the load and point out the potholes to help make the ride a little less bumpy.