Over the last year or so, experts have thrown around the word “worst” with abandon. This time period has been called the worst time to buy a house, the worst time to start a business and the worst time for all sorts of other things, all because it’s been acknowledged as the worst market in 50 years. So why on earth would we decide to start a venture capital (VC) firm, of all things, right now? I’ll tell you exactly why.
Startups Need Real Help
I love startups, and I know a great deal about them. After all, at our previous venture, a marketing consultancy, we led more than 4,000 go-to-market (GTM) engagements serving high-growth organizations. In a time when funding is scarce, markets are changing, and founders are struggling, organizations need more than capital to overcome these challenges. They need experience and expertise.
The current landscape is marked by a shaky economy and widespread buyer reluctance. These circumstances require smart growth and go-to-market strategies that no longer rely on huge cash burns to feed the “funnel” model that has become so ubiquitous. Our unique operator-immersive model enables us to not only advise startups about these, but supply them with proven playbooks and diversified revenue channels, and then help them operate on a day-to-day basis to execute against those frameworks.
Some organizations claim to get involved in a deep operational way, accelerators and incubators have been doing this for years, but the truth is that most of the advisors in those settings are delivering in a highly fractional way. There’s no way to be effective in multiple 9-5 roles and also be truly boots-on-the-ground for a startup you’re investing in. This is another reason why our model, above all others, is structured for action, 360-degree investment and success.
Of course, while our true desire to fuel startups drives us, we’re businesspeople at the end of the day. We want to make money, which leads me to…
We Bet on Success
When you look at traditional VC models, the numbers seem great for the VCs but abysmal for the vast majority of founders. That’s because the system is broken. We saw that only 8% of all funded startups actually return invested capital, and we immediately thought of the other 92% of startups that make up that pie. We thought of those that had gotten funding, but little else in terms of the true value-add and thus had consequently failed – and we knew we could do better.
The more we dug into this, the more it became clear that traditional VC’s make a lot of bets, but only expect that a select few high-fliers will actually reach that coveted unicorn altitude. They spread their money around like they would in the stock market, unable and unwilling to invest more than funds into their startups because they know the majority will tank, supported by a few blockbusters. In other words, it’s the movie-making business model.
We don’t accept that, so we set out to do things differently. Our operator-immersive capital model gives our founders both the funds and the tactical guidance they need to grow. We only make bets on startups that are profit conscious and have a ‘bootstrapped mentality’, even when they are venture-backed. We want returns from every single investment, and our heavily immersive model means that we’ll make sure that’s what we get.
The Ones Who Can Sell Now Can Sell Anytime
Another reason why we launched our firm when we did? Because the startups that can acquire customers in today’s climate will be unstoppable in a healthy one. Right now, buyers aren’t buying anything that doesn’t drive real value in their business, so companies that sell “nice to have” products or bandage surface-level pain are getting knocked out of the market. The businesses that solve mission-critical problems, conversely, are needed more than ever.
As we evaluate companies for potential investments, we’re looking at what VC firms should always look at, no matter the economic landscape: strong fundamentals. Does the startup prioritize profit? Do they have a roadmap to profitability? Are they already profitable? We want to back companies that have identified a strong vertical through unique insight into that market and are ready for the rocket launcher that is partner-led growth. This is where we can make the biggest difference and catapult startups into wild success.
All this to say, now is the time. It doesn’t matter if every single pundit says that now is the “worst” time to make investments. At SoftWrap Capital, we choose businesses that are uniquely positioned for success – via focus, via mentality, via ecosystem – and we bet big on them, financially and operationally. That’s how the uncommon can become common.
p.s. True to one of our core methodologies we operate almost exclusively via trusted referrals, so if you know of an uncommon seed-stage startup post product-market-fit and looking to scale up go-to-market fit let’s connect.
