What will 2025 hold for startup founders?

Does anyone have a crystal ball I can borrow?

It sure would be nice to be able to see the future. Will I raise another round? Get acquired? Go public?

Fidelity Private for Shares℠ can’t exactly show you the future, but it can model different investment & exit scenarios to help you imagine what the future could hold.

Like, what happens if you raise another round? How much dilution will you see? How does that change if your valuation increases, or if your funding amount decreases? How much liquidity might you see if you got acquired?

Scenario modeling is just one of the ways Fidelity empowers startups. They can also make your fundraise easier by helping you get your 409A valuation, organizing your data room, managing your cap table, and so much more.

Crystal ball shmystal ball. Let’s look into Fidelity Private Shares, instead. Mention this newsletter and receive 20% off your first-year paid subscription.

*this is sponsored. Hustle Fund and Fidelity are not affiliated.

📰 Today's Edition

Well, 2024 is basically over.

If you're wondering what the world of fundraising is going to look like next year, you're in the right place. That's what we're gonna talk about in today's edition of The Founder Playbook.

🥸 A quick note: this will be the last edition of The Founder Playbook for the year. We'll be back on January 9th with more actionable tactics for startup founders and startup teams.

Now, where were we? Ah yes... the future. But in order to see the future, we've gotta understand the past.

Over the last 4 years, the world of VC funding has been one big roller coaster.

• 2021: A great year to be a startup founder. VC cash was flowing, and valuations were crazy high.

• 2022: Interest rates went up, making it harder for VCs to raise their funds. Startups had a pickle of a time trying to raise.

• 2023: VCs started asking annoying questions like, "So, when will you actually make money?"

• 2024: Interest rates dropped, which freed up capital for LPs to invest in venture capital funds. Fundraising was hard but not impossible.

Now, as we stand on the precipice of 2025, you might be wondering: "What's next on this wild ride?"

Let's find out.

The hangover from the ZIRP party

Ah, the ZIRP era. For anyone out there who doesn't read the Wall Street Journal (hi, it's me), ZIRP stands for Zero Interest Rate Policy.

And from late 2020 to early 2022, the U.S. was in it's ZIRP era. The low interest rates were established to encourage spending – and investing – to help boost the economy.

The result was that capital was freed up. And investors became more willing to take a bet on venture capital and startups.

That meant that VCs were able to raise funds, and then use those funds to invest in startups.

The surplus of VC funds up meant that founders got their pick of terms. So valuations were crazy high.

But then, like a great New Years Eve party, it had to end. Interest rates went up, and suddenly the music stopped. Reality hit:

• Capital became scarce

• Valuations dropped

• VCs had to report huge markdowns in their portfolios

When VCs have to report huge markdowns in their portfolios, it makes it really hard to raise additional rounds to keep investing. And LPs (the people who invest in VCs) opted for less risky investment opportunities.

Like steel and gold and real estate.

For startups that were brand new, finding capital became all but impossible.

And startups that had been heavily funded during the ZIRP party – and that were reliant on outside funding to operate the business – weren't able to maintain their growth rate. A lot of those startups went through massive layoffs or shut down completely.

Yeah... 2023 and 2024 were kinda rough.

Will 2025 bring a new dawn?

So, here's the billion-dollar question: Will interest rates drop in 2025? VCs are crossing their fingers, their toes, and probably their eyes, hoping for a "yes."

If interest rates drop, it could mean:

• More cash flowing into the economy

• Easier fundraising for VCs

• Potentially easier access to capital for startups

We may see emerging funds – aka not super established VCs, but folks who are new to the game – still struggle to raise capital. Those fund managers don't yet have the data to prove that they are good at picking companies, and LPs are still a little risk shy.

So startups are most likely going to be raising from firms that have been around for at least 5+ years.

That said... if 2020 taught me anything, it's that predicting the future of the economy is about as fruitful as a dead lemon tree. So while we can hope for a positive 2025, it's also smart to prepare for, well, anything.

Preparing for anything

How can you prepare your startup for whatever 2025 throws at you? Here are some strategies that'll serve you well, no matter which way the economic winds blow:

• ✂️ Trim the fat:
  • Be ruthless about cutting costs
  • Prioritize spending as if every dollar was your last
  • Consider remote or hybrid work models

• 💰 Boost your revenue:
  • Double down on customer acquisition and retention
  • Explore new revenue streams
  • Look for strategic partnerships

• 🎤 Polish your pitch:
  • Emphasize your path to profitability
  • Showcase your adaptability and resilience
  • Get clear on your "right to win" (why are you are snowflake in a blizzard of startups?)

These strategies aren't just for tough times. They're like a nice shae butter lotion – beneficial in all seasons.

If all else fails, keep your chin up, your burn rate down, and your customers happy. And maybe start practicing your "interest rates dropped" happy dance... just in case.

See you in 2025!

Kera from Hustle Fund

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