Navigating Market Cycles: How to Extend Your Web3 Startup's Runway for Success

Having a sufficient runway is more than just a number.

It's a vital metric that guides your budgeting, strategic planning, forecasting, and fundraising efforts. In 2023's unpredictable fundraising climate, with high inflation proving persistent across most major economies and investors becoming extremely cautious, exploring alternative approaches to extending your startup's runway has grown into a pressing priority.

We explore several strategies that startups in our accelerator program have used to stay in the game and persist on the road to success.

Being a global accelerator deeply embedded in one of the world's largest crypto ecosystems, we have seen first hand the trends and successful approaches adopted by start-ups to survive and thrive in the world of Web3 and AI.

If you are an entrepreneur you can discover the empowering potential of our accelerator and grants programs, designed to elevate your start-up to new heights. Unlock a world of opportunities and support tailored to your entrepreneurial journey. Visit us now at Cronos Accelerators and take the first step towards accelerating your success. Let's innovate together!

Step 1: Assessing Your Startup's Current Runway

Before exploring any strategies for extending your startup's runway, it's first essential to know where your finances stand. Taking the time to sit with your founding team to calculate:

Current runway: How many months of working capital will you need until you reach your next raise, exit, or achieve a level of profitability that removes the necessity for outside money?

Available cash: What is the total amount of liquid assets you currently have on hand? This will include cash you have in bank accounts, initial investments, and any other readily accessible funds.

Monthly burn rate: How much is your venture burning in cash every month to stay afloat?

This can be arduous, but is necessary to understanding the current life expectancy of your start-up. This review sets the starting point for all of your planning and allows you to have a holistic perspective of your start-up’s status and options in front of you.

Step 2: Cutting Your Cash Burn Rate

Once you have an overview of your current forecasts, one of the most immediate ways to extend your runway is by reducing your monthly cash burn rate. While increasing your revenue and cash is crucial, optimising your expenses and ruthlessly cutting your non-essential expenses can have a more immediate impact.

For Web3 start-ups this might mean re-evaluating your timeline for the launch of a token offering, cutting your budget for hiring and marketing, or re-allocating resources to the development of your product and organic community building. Efficiency and being honest on your business’ true fundamental necessities is key to extending your start-ups runway.

Step 3: Fundraising and Raising Capital

Fundraising remains a crucial avenue to extending startups’ financial runway; securing additional capital not only helps to ease immediate liquidity pressures but also positions you to navigate future funding rounds more smoothly.

While early-stage investment played a key role in fueling Web3s explosive growth during it’s early stages, the current economic uncertainty has reshaped the fundraising landscape and risk tolerance of investors for start-ups in this sector.

That said, traditional early-stage investment firms are always on the lookout for good projects and ideas, and are ready to financially support teams they strongly align with. Getting on their radar during a bear market is important, due diligence takes time and persistence is key. Demonstrating early-stage traction, building a service/product that delivers actual value, and having a well-thought-out plan to profitability are now considered basic requirements for investors. Investors are still eager to invest; competition has just become considerably more fierce.

A significant number of investment firms have taken measures such as temporarily suspending or reducing the deployment of new funds, however, this has also been done in order to preserve existing capital to provide ongoing support to their current portfolio companies. If you’ve previously raised and built an existing network, your earlier investors can be a lifeline during bridge rounds, as they are typically more willing to make follow-on investments.

Raising for a Longer vs Shorter Runway

In most scenarios, it’s advisable not to aim to raise too little. Instead, target for a runway that extends for at least a year and a half. Some startups may consider raising for a shorter period, with the expectation of achieving a higher valuation in the next funding round, following improved product development and traction. This approach ensures that you avoid giving away too much of a stake in your business at a valuation that compromises it.

However, predicting future market dynamics can often be tough. In the current economic climate, securing a more extended financial cushion is a sensible strategy. But be flexible, this approach should be tailored to the specific circumstances of your project. Staying adaptable and not giving a sense of desperation is key.

Token-Based Fundraising

If you're considering raising funds via a token-based approach, your fundraising will take on a unique dimension. You'll encounter a diverse set of stakeholders, including angels, syndicates, DAOs, and early-stage VCs. While the fundamentals of your business and roadmap will still be crucial points of focus for each of these investors, your tokenomics and token utility will hold even greater influence on investors’ confidence. In this case, the performance, returns, and risk to the investor is linked to the token. Including clear and well-thought out token value flow and token allocation slides in your deck is a must. Any serious token investor, who is legitimately invested in the project, needs confidence that your team comprehensively understands where and how the token value is accruing.

It’s worth highlighting that at present, we’ve observed a reduced enthusiasm from investors to invest in pure token-based fundraising, given the lack of liquidity and uncertainty on the positioning of tokens in current and future security regulatory frameworks. While we’ve seen a lot of different trends come and go even in the last 2 years, in 2023 the SAFE+Token warrant has become the standard.

Tailoring your Approach

Although the pool of potential investors, and to a greater extent pure-token investors, may be smaller during this live market, each avenue is still worth assessing. Making the right decision depending on your start-up’s unique position and approach, regardless of the current market trends, is fundamental.

Preparation and Leg Work for the Next Bull Market

Fundraising in a crypto bear market presents unique challenges, making it a strategic move to consider holding off until the next market cycle. To prepare for the next bull market, it’s often beneficial to start socialising with investors as early as possible before you really need the money. This early engagement can be instrumental in building rapport and trust; even when your project is in its infancy. When investors already know the founder and have witnessed the startup's journey from inception, they are more likely to have a warmer and more understanding relationship with you. This can be invaluable when you eventually officially present your case and start to raise.

Step 4: Exploring Alternative Sources of Funding

Given the current fundraising landscape, it's wise to also explore alternative sources of funding. Various social, governmental, and corporate support initiatives are widely available to provide financial support to early-stage projects. Consider researching the programs available to you, and tapping into blockchain ecosystem funds, grants programs, accelerators, and crowdfunding platforms that run all year round.

These initiatives will typically have a thesis or specific type of start-up that they aim to support. Performing some basic online research and keeping an eye out for the opportunities that you are most suitable for, will put you in the best position for success and save you valuable time. As part of the application process, prepare your pitch deck and engage in interviews with the program team in a similar manner to how you would for a traditional investor meeting. First impressions always matter.

Taking caution and the time to also carefully evaluate the terms and restrictions associated with these sources is essential. For instance, ecosystem funds often offer grants with specific milestones and exclusivity requirements, or may require you to build on top of their blockchain. Ensuring that the ecosystem aligns with your startup's value proposition and target audience before committing is crucial.

For crowdfunding platforms the process is slightly different. These platforms offer you the chance to get your startup in front of a broad global audience. Here, if your idea resonates with retail audiences, you have the potential to receive smaller investments from a large number of people, as opposed to the more traditional route of getting larger funds from one or two investors. This approach can be especially advantageous for a Web3 startup, given the important role that community plays, as it allows you to engage and build a community that is more deeply involved and connected with your start-up’s journey.

Learn more about how our accelerator and grants programs can help support your start-up today: https://cronos.org/accelerators

Step 5: Bootstrapping

For many early-stage founders, the attraction of bootstrapping may not be immediately obvious, especially with start-ups having more financing opportunities available than ever before. It’s often tempting to believe that the only path to success is through external investment. However, self-financing your business through organic growth has actually been the foundation of successful entrepreneurship, and can be conducive to a resilient business that is successful in the long run.

The key to successful bootstrapping lies in establishing sustainable cash flow back into the business as quickly as possible. Operating with limited funds requires you to be innovative and maximise how efficiently you re-invest your business revenue and initial capital to grow organically. With an immediate focus on bringing in revenue, the business must be structured in an especially cost-effective way, prioritizing product development, customer service, and organic marketing efforts.

While bootstrapping can be a challenging path, it offers you a significant advantage - maintaining full ownership and control of your business. Without external investors, your business remains undiluted, allowing you to set the direction, pace, and make decisions that align with your project and goals, without the external pressure to push for rapid and often unsustainable growth.

Organic Community Growth: The Root of Success in Web3

Engaging directly with your community isn't just a strategy; it's the cornerstone of success in the Web3 space. Startups within our current cohort are reaping the benefits of organic marketing — a cost-effective and genuine approach. In these bear market times, direct interaction from the founders and team resonates more deeply than any outsourced efforts could. This hands-on approach doesn't just save on costs; it cultivates a more authentic and involved community.

Consistency is key, with projects offering regular updates through newsletters or Twitter spaces seeing a surge in loyalty and support. This isn't merely about staying connected; it's about nurturing a community that can attract investors when you're ready to take the next step in your fundraising journey.

Take Bubblemaps, from our first cohort, for instance. They've recently closed an impressive €3M funding round, and they attribute a significant part of their success to the organic growth of their community. See their story unfold here: Bubblemaps Success Story.

Conclusion: Extending Your Startup's Runway

It's not just about surviving the market's ebbs and flows; it's about laying a solid foundation for enduring success. An in-depth review of your finances, coupled with strategic expense management and a keen eye for diverse funding avenues, can bolster your startup's resilience. In a market that prizes adaptability, a thoughtfully extended financial runway distinguishes the startups that merely survive from those that thrive.

Join the Cronos Accelerator Program

With a substantial $100M backing, the Cronos Accelerator Program propels developers toward building the future of Web3 within the thriving Cronos ecosystem. Being part of our accelerator means you're in sync with over 80 million active users, enjoying direct access to the resources of Crypto.com and Cronos — leadership insights, marketing support, and a collaborative community.

We are more than a program; we are a launchpad for innovation and partnerships, a space where advice flows freely, and collective growth is the goal. Applications for our next cohort are now open. Discover how we can elevate your project and join a network where building together is the norm.

Ready to extend your reach? Learn more and apply now:

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