Startups should target steady investment

"SLOW and steady wins the race" — a phrase that we've heard so often that it's easy to bypass the truth of it. The phrase can be applied to many different areas of life, and business is no different.For enthusiastic and highly ambitious startup founders, the prospect of high early investment rounds can seem incredibly inviting — it offers the shimmering prospects of fast growth, new service offerings and expansions into new markets. However, with more than nine in ten startups in the Philippines currently failing within the first ten years, founders would do well to return to that old phrase, and ensure they go slow and steady and achieve consistent growth.

Discerning between success and investment-ready success

One of the first things that can trip up startup founders, particularly inexperienced founders, is telling the difference between initial success and success that indicates the company is ready for fundraising. A common mistake arises after the company begins to acquire a base of satisfied, repeat paying customers. In this situation, founders should ask themselves some honest questions: does the technology offer unique value that competitors can't match? Does our technology truly offer a long-term solution that satisfies the needs of our customers?Founders should also consider allowing some space for initial scaling. They should consider whether customers will evangelize the company or products to others and whether the value proposition can be easily communicated.Early growth can generate essential data that can then signal the company's readiness for external investment.

Paying attention to local conditions

Keeping a close eye on local conditions and opportunities can pay major dividends. According to Statista, the Philippines is projected to reach a Total Capital Raised of 41.85 billion in the Capital Raising market by the end of 2025 but is currently facing mild decline, influenced by factors such as regulatory changes and the evolving landscape of fundraising methods, which are reshaping traditional and digital approaches.Nonetheless, the Philippines startup ecosystem's value, as per the 2024 Global Startup Ecosystem Report by Startup Genome, surged to $6.4 billion USD in 2024 from $3.5 billion in 2023. Tech funding in the country also saw a nearly fourfold increase in 2024, exceeding $1 billion.This growth has spurred investor interest. Kaya Founders, a local venture capital (VC) firm, has earmarked $25 million for investment in at least 10 startups over the next two to four years. KickStart Ventures, Globe Telecom's VC arm, plans to invest in five startups both domestically and internationally in 2025, with a focus on artificial intelligence and cybersecurity. Furthermore, GCash is contemplating a local IPO in 2025, which could potentially raise up to $1.5 billion and become the largest IPO in Philippine history.Startup founders should pay attention to these conditions and take in other economic considerations when looking to raise investment.

Choosing the right investor

Selecting the right investor is also very important, and founders should exercise caution when accepting investments to fuel their growth. While fundraising following early success may seem like a desirable outcome, partnering with the wrong investor can lead to significant challenges. In some cases, securing investment won't prevent missteps; it will actually amplify them.Choosing an investor is a crucial decision for any business leader and startup founders must conduct thorough due diligence to ensure that goals are aligned and that they will be a valuable addition to the company.

Every company is different

It's also important to keep in mind that every business journey is different. As such, finding the most efficient and effective growth strategy for a company is a process that cannot be rushed — there is no single correct way or timeline for scaling a business.To illustrate this point, let's compare the growth trajectories of two well-known tech startups:Uber and Klaviyo. In 2010, one year after its founding, Uber raised $1.3 million USD in seed funding. In the decade leading up to its initial public offering in May 2019, the company raised over $20 billion in equity and debt. Uber was briefly the world's most valuable startup, but its IPO was the biggest first-day dollar loss in US history. Uber only turned a profit after four more years marked by growing pains, workforce reductions, and even a reported shareholder revolt.Klaviyo was founded in 2012 and secured $1.5 million in seed funding in 2015. Unlike many tech startups of the time, Klaviyo chose to bootstrap for the first three years. They focused on providing measurable, attributable value to their customers, who in turn became strong advocates for the product. This prudent approach to growth and fundraising is evident in their successful 2023 IPO, especially during a period when other tech startups struggled. There are numerous paths to profitability, but the most effective ones prioritize customer satisfaction. Startups become investment-ready when they demonstrate strong leading indicators, such as negative churn, rather than after a predetermined period.

Failing is a necessary part of the journey

Founders can also learn valuable lessons from both the failures and successes of other companies, but failure itself is inevitable. The ability to fail quickly and learn from those experiences is essential for any founder. Breathing through failures can often uncover significant opportunities for both personal and company growth. Like any skill, mastering the art of failing requires making countless mistakes along the way. There is no shortcut to success; the price of mastery is paid in failures.Ultimately, startups must be cautious about raising investment. They need to partner with the right investors and do so at the right time within the context of their own growth journey. They need to analyze the market conditions to reduce the overall level of risk. Despite this, startups are only able to gain a certain level of certainty through this analysis and ultimately, risk can never be fully eliminated. This brings the possibility of uncertainty and even failure, but these are opportunities to learn and develop. However, what I can assert is that rash and rushed business decisions are very unlikely to work long term. It is far better to target slow and steady investment growth.

Matt Spriegel is the co-founder & chief executive of Atiom, a behavioral tech software-as-service (SaaS) company transforming team performance across the hospitality industry.