How startups can thrive in a challenging market

Startups disrupt traditional business landscapes—that’s what makes them such exciting ventures. But when the landscape for startups itself faces disruption, anxiety and caution can take root.

2021 was a remarkable year for global venture capital investment. As reported by market intelligence platform CB Insights, deal values in 2021 doubled those of the previous year. Investors poured money into some of the world’s most innovative startups, including Klarna and Ziply Fiber.

Like all periods of rapid growth, though, this one couldn’t be sustained indefinitely. In 2022, startups faced a contraction in both founder deal volumes and values.

CB Insights estimates that global venture funding hit $438.9 billion by the end of 2022. That’s an approximately 30% decline in value compared to the $630.3 billion invested globally in 2021. This softening has created concern throughout the startup ecosystem in North America.

But there are strong reasons to believe that many startups will be able to weather this ‘tech winter’ by sharpening their focus and streamlining their costs. With support from the right partner, optimized architecture, and up-to-date learning, startups can stay ahead of potential challenges while reinforcing their financial foundations.

Optimizing spend

As startup fun raising landscape evolves, we see a renewed focus on a startup’s fundamentals, emphasizing revenue over growth and an accompanying desire to see costs effectively managed.

The biggest startup expenses include personnel, marketing, and cloud infrastructure, so we encourage founders to assess if they’re using cloud services as efficiently as possible. By doing so, a startup can free up valuable resources and strengthen its financial posture while making the most of its investments in the cloud.

At Amazon Web Services, our teams take active steps to help startups save money on their cloud spend. While it may seem counterintuitive, our teams are actually tasked with reducing our customers’ cloud bills. This involves conducting regular account and architecture reviews to ensure that our customers are using the most cost-effective pricing models—and it prevents them from paying for more services than they actually need.

One service that can clarify spending and illuminate areas for improvement is AWS Cost Explorer, which helps startups visualize, understand, and manage their AWS costs and usage over time. It also makes suggestions to help optimize performance. Other tools like AWS Trusted Advisor have helped our customers save up to 40% on their cloud costs by monitoring service usage.

As an example, Ramp, a tech-first finance automation platform, reached unicorn status and became America’s fastest-growing corporate card. To ensure they're managing their cloud costs as they scale, Ramp has leveraged AWS Cost Explorer to understand their bill and identify potential wastage. Ramp also leverages AWS Graviton Processors and AWS Savings plans on the recommendation of their Account Manager.

Building capabilities and mastering new technologies

A heightened attention to saving on costs doesn’t mean that startups need to sideline their ambitions for growth and learning. Upskilling is as critical now as it’s ever been. In fact, upskilling and professional educational can be some of the best ways to optimize costs—they help future-proof a business without expensive investments in new equipment, and they preserve a company’s competitive edge in a changing marketplace.

That’s why we work closely with our startup customers to help equip their teams with the most in-demand digital skills.

AWS Skill Builder, for example, offers more than 500 free courses that enable learners to build their cloud skills and knowledge. This fosters a growth-oriented culture primed to operate at the pace of innovation that startups are known for.

Finding your community

During challenging times, it’s especially important to grow your network and community of peers and potential clients. Networking is an excellent, cost-effective way to stay active and develop your business during a market downturn. It can help strengthen public awareness, raise your profile within your own sector, and facilitate potential business partnerships—often at a fraction of the cost of other marketing and outreach efforts.

That’s why AWS helps startups build connections by introducing them to potential customers and investors, as well as by offering peer networking and learning opportunities.

This year, we’ve launched new programs to bring startup executives together to share ideas that will help them better navigate their way forward. Our MVP CTO Fellowship program, for example, features both in-person events and an online community designed to encourage startup executives to mentor and learn from each other to build stronger businesses.

Staying focused on fresh ideas and opportunities

Despite the concerns in the startup environment today, AWS remains confident that this is a great time to launch and grow a startup. Funding remains available for entrepreneurs with great ideas, and opportunities abound for companies eager to optimize their costs and safeguard their futures. AWS is committed to supporting our startup customers, who continue to innovate and solve the world’s biggest problems. We are excited to see how startups will prove what’s possible in these unique times.

Setting up for success

While investment dollars are down overall from 2021, significant volumes of venture capital are still being invested. For example, total global funding in 2020 reached $298.2 billion, and 2022 figures easily surpassed that amount. CB Insights also reports that 66% of overall deals in 2022 happened at the early stage, which tells us that new founders can be confident that funding for fresh, innovative ideas is still available.

Running a startup in any economic climate isn’t easy, and at AWS we are committed to helping startups run a business optimally in the cloud. For startups at the earliest stages, our AWS Activate program offers many benefits to get up and running quickly and efficiently, including technical support and training, business mentorship, and applying for cloud computing credits.

Startups can use cloud computing credits to obtain one or more of the 200+ cloud services AWS offers while they navigate the early critical steps of proving their concept and testing product-market fit. Since launching Activate in 2013, we’ve seen hundreds of thousands of startups around the world benefit, including AirBnB, Slack, and WOMBO. Over the past two years, AWS has provided more than US$2 billion in Activate credits to assist early-stage startups in launching their businesses and accelerating their growth.