Startup Recalibration: Without Adjusted Milestones, You Won't Get New Funding – Marvin Liao, Diaspora Ventures

About this episode

With over 450 investments in early-stage startups, Marvin Liao from Diaspora Ventures ranks among the world's most active investors. In our conversation, he shares his observations about the current market situation and provides concrete advice for founders who need to realign during difficult times.

The Reality of Today's Market Situation

Liao observes a recurring pattern among his portfolio companies: many founders assume that the difficult market situation only affects others – not themselves. This denial can have fatal consequences, especially when it comes to the next funding round.

"Founders need to understand that the investment landscape has fundamentally changed," explains Liao. "The million-dollar rounds from previous years won't simply repeat in 2023. Anyone who doesn't accept this and adjust their milestones accordingly won't get new funding."

Why External Help is Crucial During Crisis Times

One of the key insights from our conversation: during difficult times, it's crucial to seek external help. Many founders try to handle everything alone – a mistake that can endanger the company.

"Being unprepared has consequences," warns Liao. "Founders must honestly assess whether they're prepared for the next crisis year. This also means asking external advisors, mentors, or experienced investors for advice."

Revising Milestones and Developing Survival Strategies

A central point of our discussion is the necessity to completely overhaul milestones and plans for the next funding round. Making it through 2023 with the money raised in previous years requires a well-thought-out strategy.

Liao recommends a pragmatic approach to fundraising:

• –Set realistic valuations
• –Plan for longer runway
• –Model multiple financing scenarios
• –Start conversations with potential investors early

Crisis Communication

Particularly challenging is communication when founders realize their company is in crisis mode. Transparency is crucial both with their own team and with investors.

"If you realize the company might not survive the next phase, honest communication is the only way," emphasizes Liao. "Hiding problems only makes everything worse. Investors and employees can only help if they understand the situation."

Not Everything is Bad: Opportunities in Crisis

Despite all the challenges, Liao also sees positive aspects in the current market situation. For well-prepared startups, opportunities definitely exist – less competition for talent, cheaper acquisition costs, and more focused investors who prioritize quality over quantity.

Practical Steps for Recalibration

To determine whether you're prepared for difficult times, Liao recommends concrete measures:

• –Cash flow analysis: How long will the money last under different scenarios?
• –Milestone review: Are the planned goals still realistic?
• –Team assessment: Do we have the right people for the crisis?
• –Market analysis: How is our segment really developing?

Keeping a Clear Head in Turbulent Times

Liao's most important advice: keep a clear head and don't rush anything. "Company culture and communication are crucial especially during crisis times," he explains. "Panic leads to bad decisions. Instead, founders should proceed systematically and focus on what's essential."

For founders wanting to build international companies, Liao has special advice: "Think globally, but start locally. Build a solid foundation first before you expand."

Lessons from Experience

When asked about advice he often gives but finds difficult to follow himself, Liao admits: "I tell founders to take care of themselves and maintain work-life balance. But as an investor with such a large portfolio, I often struggle with this myself."

His investment approach has also evolved with market conditions. "I'm more selective now, but I still believe in backing great founders. The fundamentals of what makes a successful investment haven't changed – execution, market timing, and team quality remain crucial."

Final Words for Founders

Liao's message to founders is clear: only those willing to adapt to the new reality will survive. This means honest self-assessment, adjusted milestones, and above all: early communication with all stakeholders.

"Recalibration isn't a sign of weakness, but of strength," Liao concludes. "The founders who act now and adapt their strategies will emerge stronger from this phase."

For European founders specifically, he adds: "Don't let the current market conditions discourage you from thinking big. The best companies are often built during the most challenging times. Focus on building something truly valuable, and the funding will follow."