Being a founder is tough enough before you throw in 2 years of COVID-19 followed by high interest rates, depressed customer purchasing power, and a war on your doorstep.

They say that what doesn’t kill you makes you stronger. But many founders are furious with their investors, having been pressured to take more money and grow at all costs pre-2022 and then one year later, being told to slash costs and break even to survive.

In our investment choices, we always seek founders going for ambitious yet robust growth, who care about capital efficiency*, and thus are well-positioned to weather the inevitable market cycles. As the early signals of a market downturn were forming in early 2022, this became a recurring topic of discussion with our founders to prepare them to come out fighting in 2024.

Private equity investment is recovering and confidence is starting to return, but it’s going to take a while. H2 2024 and H1 2025 will see steadily increasing investment activity. Founders need it, and investors have dry powder burning holes in their pockets. There are consolidation and build-up opportunities for companies in stronger positions to take advantage of lower valuations.

So, what will we be expecting our founders to change in H2 2024? For us, it’s not about strategy, it’s about execution.

Now that founders have improved their business fundamentals, made the product more robust, and cleaned out the deadwood, they need to execute. They need to demonstrate robust metrics growth whilst inspiring the confidence of newly capital efficiency-conscious investors for the next round in 2024/25.

Those that solidly deliver the basic performance KPIs will have VCs competing to invest. Those that fall short will find it very difficult to raise at all.

Founders need to be crystal clear on where the value lies in their business and the choices they have. They should continue, with renewed attention, to build and deepen relationships with potential suitors. They should clearly define their alternative options and the decision criteria that will trigger them.

As founders look to shift back up a gear, large language models and generative AI burst onto the scene, bringing the promise of new possibilities and an excited new glint in investors’ eyes. How should they exploit it?

The first priority is to secure the technology moat. It is becoming easier to build a product at incredible speed using AI technology, such as Bunq’s new GenAI-powered search / Q&A function in the banking app that enables customers to ask questions or seek advice regarding their bank accounts, savings, spending habits, budgeting, financial planning, and transactions. The AI technology at the product’s core must continually evolve to stay at the leading edge of innovation.

Secondly, use these new technologies to accelerate execution, boost the top line, and become leaner at the same time. There are already many examples of startups successfully leveraging (gen)AI in this way. The use cases include:

• Freemium AI tools provide specialised advice and mini-solutions to hook prospects and improve conversion

• AI copilot tools to help developers accelerate code development

• Information summarisers to kickstart almost any research task whether it’s about markets, competitors, technologies, people, prospects…  

• Email auto-response starters to help teams reply faster

• Marketing, social media, presentation, video, and voiceover content generators to accelerate and boost communication

• Chatbots to automate sales, engagement, and customer service

• Summarisers of internal or commercial meetings that make notes and to-do lists

• Assistance bots that provide Q&A on internal knowledge bases for compliance, sales, customer service, new employee onboarding… 

• Expense management and pre-accounting solutions

The number of tools and solutions is growing exponentially and will need careful assessment to select and implement in the most impactful way, but it is essential to start the process now to reap the benefits during 2024.

In conclusion, founders should seek, with renewed determination, to build on solid business fundamentals and exploit the opportunities that GenAI can bring, whilst keeping a clear head about their options and building the necessary relationships to position them to make the best of uncertain outcomes.

* This is also our philosophy behind the Fintech 100 that we publish each year with finance innovation; for the first time, we integrated measures of capital efficiency into the ranking score.  Rankings based only on total funds raised do not consider the fundamentals of the business, presenting a more skewed result.