In a cautious market, investors look for resilient businesses. Funding cycles are longer, due diligence is tougher, and the bar for growth is higher than ever.
But this isn’t bad news. It’s an opportunity.
A downturn clears out the noise, rewarding founders who build efficient, durable companies. Founders who master their finances today are the ones who will lead the market tomorrow. If you’re fundraising now or planning to soon, here are seven practical steps to make your company stand out to investors, even in a downturn.
Think of your balance sheet as your company’s report card: it shows investors at a glance how you manage assets, liabilities, and equity. To build an investor-friendly balance sheet, focus on what it communicates.
Cash is king, and managing how it leaves your business is just as important as how it comes in. One of the easiest ways to improve your working capital is to get smart about your accounts payable.
Reach out to your key vendors. Can you get a discount for paying upfront or in bulk on essential services? Can you negotiate longer payment terms, like moving from Net 30 to Net 60? For a $50K monthly software expense, this alone could free up $50K in working capital.
Building strong vendor relationships gives you leverage. As you grow and increase your order volume, you gain more power to negotiate terms that help you hold onto your cash longer.
High fixed costs can sink a startup during a slow period. They drain your cash reserves whether you make a sale or not. The solution is to make your costs more flexible.
How can you tie expenses directly to revenue or performance? One powerful way is with equity-based compensation. Instead of committing to high salaries across the board, increase your employee stock option pool. Tie bonuses or commissions to specific revenue milestones.
This aligns your team’s incentives directly with company growth and converts a fixed payroll cost into a variable expense that scales with your success.
Every founder should be critical of spending, but in a tight market, you need to be ruthless. The key is to cut fat, not muscle.
Start by sorting all expenses into two buckets: “keeps the lights on” and “nice to have.” Eliminate the second bucket immediately. Then, look at your operational costs. Are there redundant SaaS subscriptions you can cancel? Can you downsize office space if your team is effective remotely?
Making these decisions early is a sign of disciplined leadership—something every investor wants to see.
It’s tempting to chase every new market or customer segment. But true strength comes from focus. In a down market, your most valuable asset is your core group of customers—the ones who truly need your product and have the budget to pay for it.
Center your team’s energy on serving and retaining these customers. What do they need right now? How can you deliver more value to them? A healthy business built on a foundation of loyal, profitable customers is far more attractive than a business spread thin across ten unproven ideas. This focus is central to building strong capital efficiency for your SaaS business.
Investors want to know that every dollar they give you will be put to good use. Capital efficiency is the ultimate proof. It shows how effectively you can turn investment into revenue growth.
You don't need complex formulas to show this. Point to your lean operations, your low customer acquisition cost (CAC), and your high lifetime value (LTV). Highlight how you’ve achieved major milestones with a smaller team or less funding than your competitors.
In a down market, a founder who can say, “We accomplished X with only $Y,” is speaking an investor’s language.
Equity isn’t the only way to grow. Taking on non- or minimally dilutive funding, like venture debt, is a smart way to extend your cash runway without giving up more ownership.
This type of financing can bridge you to your next equity round, fund a key project, or help you accelerate growth when an opportunity appears. It allows you to hit your next set of milestones, increasing your company’s valuation before you go back to VCs for a larger equity round.
By blending less dilutive capital with a lean operating plan, you maintain control of your company and your destiny.
1. Is it still possible to raise capital during a market slowdown?
Absolutely. Although investors become more cautious, they continue funding businesses that demonstrate resilience, disciplined spending, and strong unit economics. To attract capital during slowdowns, show investors that you're managing costs closely, achieving milestones efficiently, and focusing sharply on profitable customer segments. Founders who can clearly demonstrate capital efficiency and a path toward profitability still close deals, even in tougher markets.
2. What metrics do investors focus on during a downturn?
In a downturn, investors shift their focus from "growth at all costs" to "smart, efficient growth." Key metrics include:
3. Can venture debt help extend my runway during a market slowdown?
Yes, venture debt is particularly valuable during downturns because it provides additional cash without forcing founders to give up significant equity. By adding venture debt alongside equity financing, you can extend your cash runway, achieve important growth milestones, and strengthen your position ahead of future equity rounds. This strategic use of debt demonstrates financial discipline to investors, positioning your business as resilient and well-managed during challenging economic periods.
