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Startups, here’s how you can prepare to combat an economic downturn

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Startups, here’s how you can prepare to combat an economic downturn

A blueprint to super-proof your startup and protect against economic instability.

With record-high inflation, wars overseas and rising interest rates, experts are telling Canadians to brace for an economic downturn and warning signs are starting to trickle to the startup and innovation economy, which can affect in a multitude of ways.

Over the last year, Canada’s tech ecosystem showed explosive growth – in fact – a recent BDC VC report showed that Canada had a record year for venture capital, breaking records by almost every metric.

While some in the startup ecosystem are sounding their warning bells, like Silicon Valley-based Y-Combinator, the industry is still positioned to continue its growth. Is it always going to be clear sailing? No. But what we’re seeing is not a halt to our momentum but rather a course correction.

It’s second nature for startups to pivot and change their mindsets to focus on the opportunities at hand. Just look at Uber, Pinterest and Whatsapp, all household names that came out of the 2008-2009 recession!

We’re here to make sure that founders stay resilient, agile and are prepared to bear the punches that may come their way.

iPad screen with stock market metrics - Economic downturn blog

So what can you do to start planning ahead and super-proof your business? We’re glad you asked.

1. Leverage liquidity.

Finding the right liquidity balance for your business can not only help you gain insight into if you have enough cash to pay off your short-term liabilities. but also allows you to set yourself up for strategic growth. Having enough cash on hand is important to meet financial obligations, but holding onto too much cash might leave important investment and growth opportunities on the table. Finding the right balance will ensure long-term stability and provides a good first impression when looking to secure a loan or other funding.

2. Budgeting, budgeting, budgeting.

This goes without saying, but take a moment to sit down and understand exactly where your money is going and where your main sources of revenue are coming from. Getting a thorough understanding of finances will help make tough decisions – if need be – quickly and effectively.

3. Lock in longer commitments.

Focusing on closing longer commitments such as subscriptions or multi-year agreements with customer, partnerships and client can ensure financial security in uncertain circumstances. Recession or not, this is a great tip for any startup that is looking to extend its runway and demonstrate loyalty to customers and partners.

4. Cut costs.

It’s only natural to turn to cost-cutting measures but it’s important to remember one thing – cutting costs does not mean you need to let go of talent. Cutting costs means reevaluating your spending to axe unnecessary costs. Create plans for different levels of financial scarcity to work for different scenarios the ecosystem throws at you.

5. Back-up business plans are your best bet.

This is similar to the last point, but apply it to your entire business plan. Your best bet in preparing for the unknown is to create multiple overarching plans that fit a range of realistic possibilities. These plans should include securing funding as planned, securing a smaller amount and not being able to secure funding at all. Look at other forms of funding as alternatives, whether it be grants, crowdfunding, bank loans or support from family and friends.

Workers having a meeting - Economic downturn blog

Want to learn more about how you can solidify your contingency plans? Apply to a DMZ program here.

The DMZ’s News Roundup: What went down in May

Canada’s venture deal woes, the country’s latest unicorn company and the DMZ’s incoming Bootcamp cohort – this is your monthly DMZ news roundup.

Power up with the DMZ’s News Roundup: a blog series dedicated to providing you with a quick look back on what went down in the Canadian startup and innovation ecosystem this past month.

We’ve got you covered with the most relevant news and notable wins from the ecosystem, DMZ updates and more.

Here’s a rundown of what went down.

INDUSTRY NEWS

New BDC report reveals a record-breaking 2021 for venture capital and private equity deals, while 2022 is expected to experience turbulence

A new BDC report revealed that 2021 was a shattering year for VC, with Canada breaking records by almost every metric. Canada saw a jump in domestic and international VC investing, with 752 deals made, representing $14.7 billion CAD. However, this past quarter, VC deal counts and the money behind private equity deals took a fall. Despite the forecasted challenges, BDC suspects that the startup economy and Canadian entrepreneurs are well-positioned to take them on.

Check out the full report here.

Neo Financial secures $185 million CAD in Series C funding, becomes the country’s newest Unicorn status company

Calgary-based Neo Financial closed their Theil-led Series C funding round, in which they raised $185 million CAD. This additional funding launched the company’s valuation to more than $1 billion CAD, making them the newest tech company to earn official unicorn status in the country. Neo Financial is an online bank bringing a low-fee alternative to the Canadian financial market, helping users save costs on spending and earn high interest on savings.

Learn more here.

Neo Financial becomes Calgary's latest $1 billion tech 'unicorn' | The Star

STARTUP NEWS

SPM solution provider, Forma.AI, is expanding platform development with $45 million CAD secured in Series B funding

DMZ alumni Forma.AI (Incubator ’18), a sales performance management solution provider, recently closed its Series B funding round. With the $45 million CAD secured in funding, they plan on expanding the marketing and development of their fintech platform.

Read more here.

Fable secured $10 million USD to make online accessibility a reality for disabled users

Fable (Incubator ’20), a Toronto-based startup that helps companies make digital products more usable by people with accessibility challenges, announced a $10.5 million USD round in venture capital funding to support the company’s growth. Alwar Pillai, CEO and Co-Founder of Fable, says the company is focusing on unlocking access to more clients by targeting large corporations’ digital teams to target their users.

Check it out here.

WBI-affiliated technology firm CyborgTech to acquire DMZ FinTech alumni Fortuna.AI

DMZ alumni Fortuna.AI (Incubator ’18) announced its acquisition from WBI-affiliated technology firm CyborgTech, home to robo advisory platform Cy, for an undisclosed amount. Fortuna.AI is an AI-powered platform helping financial services scale digital tools to get new clients in the marketing and advertising sector. Fortuna.AI was the winner of the DMZ-Bank of Montreal Fintech accelerator program.

Learn more here.

DMZ NEWS

Introducing the DMZ’s Bootcamp Fall 2022 cohort of cutting-edge tech companies

In a new DMZ blog, we welcome 13 up-and-coming tech companies into our new Bootcamp cohort. Hailing from across Canada, the United States, Brazil, Estonia and Africa, this new cohort is already hitting above their own weight in a diverse range of industries. Check out all the companies in our new Bootcamp cohort here.

Looking for more startup ecosystem news and DMZ updates? Subscribe to our bi-weekly newsletter to stay in the know here.