It’s that time of year. Holiday season and no matter how many tree lightings there are to see or gift lists to address, before we break out the eggnog, time for a reality check.

We know that ‘get funded’ is on every founder’s holiday wish list. It’s not impossible, but having worked in retail advertising, we will tell you that the holiday catalogs are compiled and put to bed in August.

Which is when you should have started, if you wanted to at least have had a shot at Santa checking that one off his list.

Especially since, baby, it’s cold out there. Meaning, Venture Winter has settled in – and this holds for angels, too.  At least for now, and we have no idea when the thaw might come. Gone are the halcyon days of even the last few years when investors were writing checks more freely.

Of course, all founders know that reality and the rules don’t apply to them, and we’re sure that if you queried the more than 99% of startups that failed to get funding – and that is the accurate number, btw – that’s what they’d say that that’s what they’d thought, too

Even funding to AI-centric projects has slowed, as investors have come to realize that AI startups tend to be capital intensive and it’s not just about the initial funding: it’s about the follow-on as well. Great, you’ve gotten this far, and you need how much to get to the next level? Which may or may not even take you to running in place. Not a good look.

And watch those valuations! Valuations have come down, so be a bit more circumspect, re conservative in your valuations. Victor Larzarte, a now-partner at Benchmark spoke at Slush. His gaming company, Wildlife Studios, “raised a $60 million Series A round from Benchmark in 2019 at a $1.3 billion valuation and, less than a year later, was assigned a valuation of $3 billion when Vulcan Capital led a subsequent $120 million round. Larzarte said the company had really made “like, no progress” in between rounds, but that because Benchmark had funded the company, “everyone” subsequently wanted to invest in the company. (He said that, in retrospect, taking on too much money at too high a valuation so quickly was a “mistake.”),” Strictly VC reported.

And the last thing you want is a down round.

As Pitchbook noted, With the exception of seed rounds, “VC valuations in Q3 continued to descend from peaks registered in 2021 and early 2022. Fewer companies met investors’ higher bar for funding, which forced many to resort to bridge financings or stave off raising new capital by cutting costs.”

We’re sure that many bit the dust as well. Pitchbook might have been in a generous mood while writing the piece.

When the valuations go up, so do the expectations. In a market like this, here’s something you seldom hear mentioned, but make sure to do your own due diligence re your risk analysis. You’ve done your cost analysis re pro forma. What about your risk analysis? And what do you think is top of mind for investors. Which is why that point that founders don’t like to address in their pitch decks is so very critical: your go-to-market strategy. Better to know not only how sizeable your obtainable or addressable market is, but how you are going to reach that market.

And speaking of TAM and SOM, note that it’s better to have a wedge than an edge.  Blockchain was a wedge, as was Google Pagerank, as Zeeprime Capital pointed out, noting that “Capturing a 1% share of a $1 trillion market (while having none today) is an alluring $10B aspiration, but without a unique value proposition to a subsegment of this mega-market, it sounds like boarding a flight that has already taken off.” Or to quote Oren Harari, “The electric light did not come from the continuous improvement of candles.”

Investors are always on the lookout for a game-changer – preferably something that will disrupt an entire vertical, and while it may not be the best time to close that funding, tis the season for holiday parties and networking. And this should help spread some cheer: a founder we know was at such an event but struck out with every investor he’d encountered. Deflated, he took a loo break and the fellow next to him, making small talk, asked him how it was going. Meh. The man asked him what he was working on. He told him in brief, but he didn’t pitch: the two simply had a conversation. After they washed them, they shook hands, the man handed Michael his card and suggested that he get in touch. Yes, he was an investor and guess who wrote the first check…

We’re past the high-flying gambling year of startup funding, so while you can and may get meetings now, investors are doing due diligence, and with very few exceptions, chances are that the money isn’t going to hit the bank by the time Santa arrives.

Of course, if you still believe that you’re above all this and the current investor climate will not affect your startup at all, you either subscribe to Einstein’s theory of insanity – doing the same thing over and over and expecting a different result – or you’re going to hang tight and keep doing what you’re doing because you know that before too long, the Easter Bunny is coming to town!  Onward and forward.