There are a record number of unicorns--startups worth more than a billion dollars--created over the past few years. Part of the reason is that investors have been more eager than usual to bet on potentially edgy opportunities, pumping the value of these-still private companies skyward. However, nearly all accounts are showing that the big investment era is coming to a close.
That means your next big idea will probably be self-funded. It isn't a reflection of your concept, but a result of the market. My startup Cuddlr thrived and got acquired without any outside investment, so the slowdown of investment opportunities is far from a reason to not pursue your business. However, consider these three trends that point to a bootstrapping future:
Companies going frugal: A great Los Angeles Times piece talks to many strong, and even money-making, startups that are curbing their spending. Why? According to the Times, Silicon Valley funding is down almost 20% in Q1 2016 compared to Q1 2015. New businesses aren't getting money and those that already got money have absolutely no guarantee that they are going to get more.
Gone are the multi-year leases and fantastic indoor designs, in are the shared co-spaces and practical employee perks. And if you're bootstrapping, even the latter is a luxury.
Simplicity gets cool: Silicon Valley is hesitant to call our outrageous startup growth a bubble, but tastemakers are already saying that creating simple, effective businesses should be our priority. Startup veteran Seth Godin just did an excellent post on why failing big and risking a ton of money isn't the smartest move. "A restaurant that's too small for its following creates pent-up demand and can thrive as it lays plans to expand. A restaurant that's too big merely fails," he says, later adding "It pays to have big dreams but low overhead."
Giants get corrected: Big, juicy startups are not only getting harder to fund, but current ones are actually shrinking. As Inc.'s Jeremy Quittner wrote earlier this year, there were 23 billion-dollar-or-more startups worldwide in third quarter 2015. By fourth quarter? There were nine. Not only were Uber, Dropbox and other unicorns devalued, but some rising stars simply burned through their substantial money and self-imploded.
Doing VC funding or even bank loans is a challenge today. It makes sense to lean into the environment and plan on creating a smart, sustainable startup without outside help. Worst case scenario, you end up being offered money that you find out your business doesn't actually need.