Startups See Challenges in 2016 Fundraising, Recruiting

© Can Stock Photo Inc. / rabbit75canSometimes realism and pessimism can be the same thing.

The 900 startups featured in Silicon Valley Bank’s seventh annual Startup Outlook report, released today, largely agree they face a challenging fundraising situation in the year ahead. Another major problem? Finding the talent to build products.

The president and CEO of Silicon Valley Bank, Greg Becker, noted that while the easy money may be gone, easy money isn’t necessarily healthy:

While the environment has changed in the first several weeks of the year, we see investors and entrepreneurs taking action to operate in an uncertain market. Entrepreneurs are focusing on profitability, slowing cash burn, and are anticipating a more balanced funding environment. They are considering M&A an even more viable exit strategy. In 2016, access to capital will get harder, but it’s not supposed to be easy and there will be opportunities for good companies with good ideas — that is healthy.

Three regions featured in the survey: the U.S., the U.K., and China.

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64% of startups agreed that 2016 ought to foster better business conditions than 2015, which is an 18% drop from 2014’s outlook. In terms of fundraising, 82% considered the current environment “somewhat or extremely challenging.” Just 42% of startups expect venture capitalists to supply most of their fundraising capital. In terms of exits, 56% startups aim to one day be acquired, 19% wish to remain private, and 17% seek to complete an IPO.

As Becker noted, more M&A is expected in 2016. 43% of startup leaders surveyed expect more M&A this year than last, 39% foresee no change, and 18% expect less M&A activity.

Where talent’s concerned, a near-unanimous 95% declared the process of finding people with the right skills to grow their business challenging, with 17% citing recruiting as their primary business challenge. Half of the startups are presently hiring engineers and tech experts. Nearly as many (46%) say the lack of access to talent inhibited product development, and 30% cited this lack as slowing revenue growth.

Women are under-represented in leadership roles throughout the startup world. Roughly two-thirds (66%) of startups surveyed had no women on their board, and 46% had no women in executive roles. Just 26% of startups have programs in place to increase the number of women in leadership positions. 

Regulations are also a growing challenge for startups, particularly in the U.S. — 23% said U.S. regulations have caused them to locate facilities or move non-sales operations outside the country.

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