The global economy is in turmoil and the continued uncertainty is going to have a significant impact on start-ups. While investors look for safe havens, investment criteria will shift towards value-based, milestone-driven capital allocation. However, with the right approach, founders can not only secure the growth finance they need, but also secure the operational assistance they require to steer their businesses through the choppy waters of the next few years.
The outlook was already grim
Even before the latest tariff turmoil, 2025 was shaping up to be a tough year as the number of start-up failures continued to ratchet up. Data from TechCrunch showed a 26% growth in US start-up failures when compared to 2023, with the trend looking set to continue. The picture was no less grim in Africa, with start-up funding in the third quarter of 2024 reaching just US$306.4 million – a whopping 40% drop from Q3 2023.
This is bad news for start-up organisations as economic volatility and market corrections continue to shrink the risk appetite of investors, and longer funding cycles and reduced availability of capital make riding out the current storm all the more challenging.
The days of funding future value without clear fundamentals are coming to an end. Venture capitalists are waking up to the reality that taking wild bets on unproven ideas is simply too risky and the era of throwing capital at anything remotely tech related is giving way to a more disciplined approach. Many start-ups who raised these unimaginable sums are beginning to buckle under the weight of over-optimistic projections and unvalidated business models.
While the market was already tightening, the new tariffs and potential trade wars are adding complexity for start-ups.
Increases in raw materials, components and services will put additional strain on already tight margins as startups are forced to either absorb the new costs or pass them on to the consumer, and thereby reduce competitiveness.
Global supply chain challenges are also likely to raise their heads again and cash flow disruptions in an uncertain market will make it harder for businesses to sustain operations or expand as planned. What’s more, market access may also become an issue for those aiming to expand their geographic footprint.
However it unfolds, the economic volatility will inevitably impact start-ups, and businesses can expect to see a diminishing risk appetite from investors, with those willing to invest looking for sustainable unit economics and clear paths to profitability.
A new investment mindset
We are seeing a clear shift away from speculative, valuation-driven funding towards more value-based, milestone-driven capital allocation. We are prioritising ventures that have validated real demand, even at an early stage. We’ve also observed a sharp increase in demand for non-dilutive, use case-backed funding models, especially in B2B software as a service.
The shift is not one-sided. Founders are also realising that showing meaningful value will not only inject sustainability into their long-term plans, but make them more attractive to serious investors.
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Many founders are no longer chasing inflated rounds. Instead, they’re asking: “How can I get to break-even faster? How do I fund the next stage of growth based on paying customers, not promises?” That’s a mindset shift we welcome and support.
Rather than wildly inflated valuations (often based more on founders’ egos than reality), venture building partners will be looking for customer-backed growth, where businesses can demonstrate real-world traction, and where users are already paying or showing strong intent to pay for a solution. The venture builder can then step in and help shape the commercial strategy around that, including help with packaging, pricing, routes to market and recurring revenue.
This is not your grandfather’s way of investing anymore. We’ve seen a growing appetite for revenue-share and embedded financing models, particularly with start-ups serving SMEs and niche verticals. This aligns with our belief that the fastest path to scalable, fundable growth is to build businesses on top of clear unit economics, repeatable distribution and demonstrated retention.
A new onramp for venture capital
The current economic uncertainty, when added to the current investment trends, makes venture building an increasingly attractive option for start-ups.
Venture building focuses on creating value, not chasing valuations. It starts with the founding principle of building a strong foundation before scaling. That includes instilling the right frameworks, setting cultural norms and defining repeatable playbooks that guide decision making, execution and growth.
Focusing on core competencies and transferable skills, a well-constructed team can tackle almost any problem. It’s when these fundamentals are in place that start-ups become better equipped to adapt, commercialise solutions effectively and grow sustainably. It also best positions them to attract larger venture capital opportunities down the road.
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Looking ahead, only the most resilient start-ups will survive. What’s happening now isn’t just a market correction; it’s a fundamental shift, where capital alone won’t guarantee survival. Venture building emphasises building real, valuable businesses, not just start-ups that look good on a pitch deck. And this is what nervous investors will be looking for, especially in a risk-laden market like we have now.
- The author, Alex de Bruyn, CEO of Let’sCreate, a venture builder that partners with entrepreneurs and enterprises to develop scalable, high-growth B2B SaaS platforms
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