7 out of 10 Startup Founders Feel the 'Harsh Winter' in Investment... What Are the Solutions?

'2022 Startup Trend Report' Released
Startup Ecosystem Sentiment Scores 54 out of 100 Points

On the 22nd, a press conference was held to announce the '2022 Startup Trend Report'.

Seven out of ten startup founders recently reported feeling the 'harsh winter' of the venture investment market. About half chose to either advance or postpone their fundraising plans due to this harsh market issue. Measures taken included cost reduction, focusing on profitable businesses, adjusting investment plans, and preparing strategies to diversify sales.

On the 22nd, Startup Alliance released the '2022 Startup Trend Report' containing these findings. Since 2014, Startup Alliance and Open Survey have published annual reports to track trends in the startup ecosystem. This survey was conducted in September to understand the current state of the startup ecosystem, with participation from 200 founders, 250 employees from large corporations, 250 startup employees, and 200 job seekers.

According to the report, startup founders rated the recent ecosystem atmosphere at about 54 out of 100 points, indicating awareness of a decline due to investment contraction and economic downturn. Eighty-two percent of founders evaluated the startup investment market as contracted compared to last year, and 54.5% responded that fundraising has become more difficult than the previous year. They mainly attributed the difficulty to economic recession, investment market contraction, interest rate hikes, and tightening capital markets. Additionally, 58% of founders are well aware of the venture investment market's harsh winter, and 69% actually feel its impact. Founders of startups at Series A investment stage or beyond reported the highest level of impact. Particularly, the lukewarm investment and support from venture capitalists compared to last year contributed to the negative sentiment. Seven out of ten respondents said the startup ecosystem has become more negative compared to last year.

Forty point five percent of founders expect the economic crisis to continue next year, with the current atmosphere and situation not improving. Thirty-seven percent anticipate a more negative change than now. Only 22.5% believe the situation will improve positively. Founders identified 'securing ecosystem-based funding and revitalizing investment (35.5%)' as the most urgent need for the development of the startup ecosystem, a 19 percentage point increase from last year. This was followed by deregulation (18.0%) and support for mergers, acquisitions, and initial public offerings (14.0%). To prepare for the investment winter, founders plan to implement cost reduction (52.0%), focus on profitable businesses (48.5%), adjust fundraising plans (43.5%), and develop sales diversification strategies (41.5%).

Despite the spread of negative outlooks across the ecosystem due to the 'harsh winter' issue, many still consider starting a business. Fifty-eight percent of startup employees responded that they have considered starting a business within the past year, a 7.2 percentage point increase from last year. Fifty-four percent of large corporation employees have thought about starting a business this year, a 13 percentage point increase from last year.

Meanwhile, the fastest-growing startup as perceived by startup and large corporation employees was Viva Republica, the operator of Toss (23.2%). This was followed by Baedal Minjok and Danggeun Market. The most preferred venture capital was Altos Ventures, the preferred accelerator was Primer, and the preferred corporate venture capital (CVC) was Kakao Ventures. The evaluation of the government's role scored 62.1 points, lower than last year.

Choi Hang-jip, Center Director of Startup Alliance, said, "This trend report shows that more startups are feeling the global economic crisis and the harsh winter of venture investment. Founders are making various efforts such as reducing costs and revising revenue models to overcome difficult situations," adding, "If startups strengthen their core business and build resilience, they can surely survive the winter and prepare for spring."

This content was produced with the assistance of AI translation services.