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The high point of the US startup and venture industry seems to be at an end. According to Reuters, startup funding fell by a third in the first quarter of 2024, a reflection of conditions that investors are finding volatile and potentially slim on returns. As such, startups and indeed more mature businesses are likely to start needing to find new credit lines, trim overheads, and look for a more compelling business case to secure finances for. There are options out there, which is good news, especially for businesses with strong sales.
Borrowing Against Growth
Most startup owners will be well aware of the challenge of finding new capital when the business is growing – even when sales are strong. One potential solution to this is invoice financing. As USA Today outlines, this is a process whereby a business can borrow the value of finance from a third party, typically a bank, under the proviso that this is repaid upon fulfillment of the said invoice. One of the primary reasons to consider invoice finance is its role in plugging funding gaps. Invoices, of course, can be received across a large span of time; invoice financing helps to bring forward revenue to today, enabling growth now. This is important because of the time value of the dollar. A dollar invested today is always worth more than one invested at any point in the future; invoice financing allows that growth to be captured immediately, as opposed to waiting for receipt.
Overheads are rising and, according to Zenger, surveys show that the majority of businesses are forced to pass these on to customers. Avoiding this is crucial to improve sales, so it’s a good idea for businesses to look at where their overheads could be reduced. The US supply chain and labor market are in a state of volatile flux, so there’s a good area to focus attention on. Can better hires be sourced? Are delivery partners providing the best deal? There’s also automation to consider; AI is not only a good tool for reducing overheads, but it can help a business to improve its profile to investors.
Forming a Stronger Case
If you consider the analysis conducted by PWC, the presence of AI in the operational picture of a business is a big motivator for customers. It presents a picture of a business that’s bang up to date with its technological pursuits but also is willing to put technology into place that can significantly benefit the end user. Automation and AI also present big cost savings for businesses, as they can help to automate processes that would previously have been part of overheads.
Taking a technological front foot and investing today is the best way a business can tackle reducing venture capital. It will make the venture more attractive to investors and help to shore up sails in the current picture. Harnessing the current qualities of the business and running efficiently in the background is the key.