If 2015 was the year of "unicorn" startups with eye-popping, $1 billion-plus valuations as my colleague Jeremy Quittner has argued, 2016 may be set to take it's cue from a very different mythology. Forget the peaceful land of charmed and beautiful beasts. This year might resemble a far harsher story-world known more for brutal endings and the living dead -- Game of Thrones.
"Winter is coming to the startup world sometime in the near future," predicted entrepreneur and angel investor David Hauser on his blog recently. Many so-called unicorns might be turning a profit, but with negative gross margins on many of their products, plenty of people are starting to grow skeptical. "A number of these unicorn companies are being overvalued by private investors, with a more accurate valuation coming out after mutual funds more realistically value their holdings or the stock market brings stratospheric private valuations back down to earth," Hauser foresees for the coming year.
He's not the only one predicting a chill coming to start-up land, but as an operator in the thick of things, he's in a better position than many to offer advice to fellow entrepreneurs. So what does Hauser recommend you do if you're a founder who agrees that a Jon Snow-style fur coat might be in order in 2016?
Grab those bootstraps and pull... hard
"First of all, if you're expecting to raise money in the next 12 to 24 months, you may be in trouble because the same level of funding we're seeing today may not be around that much longer," he says. "So if your business plan includes raising more money in the near future, you may need to update your plan."
Specifically, Hauser recommends companies bootstrap "well into the $500,000 to $1,000,000 revenue range." And sorry, that advice stands even if you've been told something very different in the past. "Everyone says you need money to scale, but that's simply not true. You can be Whatsapp and get to a millions of users with no money. You can even build a hardware startup with no money. There's no industry where you absolutely need money to start your business," he insists.
Contrary to the conventional wisdom in Silicon Valley over the last few years, funding isn't for getting your company off the ground, Hauser believes. Sure, a VC check can ignite your growth, but not if you use it "to acquire customers at a price that's higher than the revenue you make from each new customer." Not in the chillier times to come, at least. Instead, if you want to survive the harsher realities that may be dawning in 2016, make sure you've figured out how to build a sustainable business before you go looking for investment.