Entrepreneur Vera Kutsenko’s seed stage vision for her startup was more literal back in 2021 when she co-founded a business based on her passion for home plants. The startup, Neverland, was created to help people optimize their gardens and other associated horticulture activities based on their geographies, as well as meet companies in their figurative backyards.
Neverland shut down months later due to dwindling unit economics. “It’s unfortunate because I Iove plants, and I think more people should have access to that, but maybe it’s just not the right time,” Kutsenko said. Her next startup was quite the pivot: a SaaS startup.
“We’re building Databricks 2.0 for marketing data, we’re verticalizing in the marketing space and making no-code AI accessible to help marketing teams make decisions around better budget allocation and resource allocation,” Kutsenko said. The new startup, Atrix.ai, is raising.
Kutsenko’s shift from selling to consumers to selling to B2B enterprises is a common pivot these days, as more and more founders adapt their pitches and business strategies to be more downturn friendly. Now that it has been over a year since tech’s current period correction first began, founders are getting more innovative in how they approach tweaking their pitch.
Some aren’t disclosing their funding rounds until they already land investor meetings for their next funding cycle, optimizing how their burn rate appears during initial inbound. Others are “dressing for the job they want” by ditching the advice to lead with scrappiness and instead opting to professionalize their website and pitch decks earlier and earlier. Sectorwise, we’re seeing crypto startups pivot into fintech and edtech companies market themselves as building for broader, more general use cases.
As for Kutsenko, there’s one other big shift in how she has built: She landed paying customers through pre-sold contracts before even having a product.
“I was like let me pre-sell, get money, and then I’ll build,” she said. “I really wanted to get that validation before going out to investors, whereas I think in the height of the market … you could basically raise off of a story.” Now, she said, you want real traction before you even attempt to raise.
A focus on generating revenue and highlighting operating and financial discipline may seem obvious, but it took awhile before founders were open to receiving that advice, says Clayton Bryan, partner and head of the accelerator at 500 Global. Before, Bryan said, founders were more reticent on taking advice because they could “just walk backward into a pool of capital … Now, they’re getting beat up in those markets.”
“It’s the same guidance from a different perspective,” Bryan said. “Folks just lost sense of being disciplined and fundamentals; and now, fundamentals are more important and back in vogue.”
The effect was on full display during 500 Global’s latest demo day in San Francisco last month. Whimsy still existed; for example, the last startup walked onto stage to “Top Gun” music. But so did bluntness: Tripitaca CEO Peter Wachira mentioned that the African travel market startup makes $850,000 in annual recurring revenue before even introducing himself.
Ultimately, he and many other founders skipped the formalities.
“We know how to get exits done,” Wachira said during the pitch. “We know how to get shit done.”
All in all, this breaks from the conventional wisdom that at the earliest stages, investors back the founder. But against a backdrop of stagnant funding and dry exits, it seems that it’s less about the founder and more about the finances.