I was watching Dragon’s Den this week when Trinny Woodall (as a guest Dragon) was listening to Sandy Tang of Love Sum Dumplings pitch her business. One comment from Trinny really caught my attention, she said Love Sum was effectively over-funded. They had too much money.
Her point? A leaner company, with less capital sloshing around, would have to make it work. Instead, Love Sum was already looking at building a factory to meet future demand, before that demand was even there, or that there was even a sense a future demand may exist – and just because they had enough money in the bank to allow this.
Business is a constant balancing act between supply and demand. You’re either wishing you had more sales or wishing you had more capacity. Striking that balance is a key business skill. While Love Sum has a strong brand and product, this single comment, backed by Deborah Meaden, got me thinking.
The changing narrative around fundraising
I remember when fundraising was the badge of success in business. Everywhere I turned, it felt like the big success stories revolved around securing investment, while I was bootstrapping and wondering if I was missing out. Not raising funds even meant missing invites to certain business events, like I wasn’t part of the club. But lately, I’ve noticed a shift. There’s less noise around chasing investment and more focus on sustainable, organic growth.
I’m a regular at Ideas Fest, a festival for entrepreneurs, and this year, I’ve been invited to speak about organic growth and winning government contracts as a viable growth strategy. A few years ago, that probably wouldn’t have been an engaging topic, but now, its an interesting topic for entrepreneurs.
Building the boring business
I’d also been listening to Kody Sanchez on The Diary of a CEO, and her key point seemed to be, build the boring business. For years, we’ve been obsessed with high-growth, high-burn startups, particularly in tech. But Kody is right, we need the so-called boring businesses too.
Curious if my hunch was right about a tide change, and if this was a wider change, I started digging into the data. Turns out, I was onto something. CB Insights reports show that for 11 straight quarters since 2022, venture capital dealmaking declined, only rebounding in Q4 2024. Globally, deal activity dropped 19% year over year in 2024, hitting its lowest level since 2016.
The venture capital drought
Aside from AI, venture capital is in somewhat of a drought. Investors are becoming more selective, waiting out macroeconomic uncertainty and geopolitical instability. The era of cash burn, raise, cash burn, raise may be fading. Instead, we might see a focus on proving the model and profitability, rather than just chasing funding.
So what’s driving this decline in VC funding? A few key factors:
- Macroeconomic challenges: High interest rates and inflation have made capital more expensive, forcing investors to be more cautious.
- Decreased fundraising & consolidation: Fewer funds are being raised, and the capital that is available is concentrated in fewer, larger firms.
- Sluggish exit markets: IPOs and acquisitions have slowed down. In 2024, VC-backed companies waited a median of 7.5 years from first funding to IPO, two years longer than in 2022.
While VC funding has declined, it remains a crucial tool for businesses operating in fast-moving industries where speed to market is everything. For those companies, securing investment isn’t just an option, it’s a necessity to scale rapidly and stay ahead of competitors.
It’s absolutely still a critical tool for many businesses, particularly those that need to move fast and disrupt a market. But I do wonder if we may see more of the Zapier model (one-and-done raises) where companies take funding as a necessary stepping stone rather than an ongoing cycle.
The importance of an intrapreneurial team
For me, the key takeaway is fiscal responsibility, running your business in a way that gives you options. Instilling an intrapreneurial mindset in your team, where they think like business owners, is critical. When employees think like business owners, they focus on profitability, efficiency, and long-term sustainability. This not only drives better decision-making at every level but also fosters a culture of accountability and innovation, ultimately strengthening the business as a whole – regardless of funding!
Bootstrapping vs raising funds
I run companies in Flood Risk & Environmental Consulting. Other business owners always say to me, It’s a long-term growth sector, and that’s true. However, that doesn’t mean we’ve not had slow months. Or late payments. If I hadn’t been fiscally responsible, we’d either be chasing investment or out of business. Instead, after 13 years of trading, we’ve built our own investment pot, our own safety net, allowing us to grow on our terms, without external pressure dictating our next move.
It’s certainly been a marathon, not a sprint, and that’s the balance. Bootstrapping takes patience, resilience, and discipline, but it also gives you full control. Raising funds can hugely accelerate growth and open doors that might otherwise stay closed, but it comes with trade-offs in decision-making and direction. A well-funded company may scale quickly but faces investor expectations, while a bootstrapped business retains full control but will take much, much longer.
Whichever route you take, understanding your business and your goals will guide your decision-making for the long term. Some industries require significant upfront investment to break into competitive markets or scale effectively, making VC funding a necessity rather than a choice. It all comes down to what’s best suited for your specific industry, business model, and vision.
