Sticking with Startups

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This blog post contains insights from the Sticking with Start-ups session that took place on January 22nd, 2025 with featured panellists: Arvind Jain (Co-founder and CEO, Glean), Heman Taneja (CEO and Managing Director, General Catalyst), Mohit Bhatnagar (managing Director, Peak VX Partners), Kate Ryder (Founder and CEO, Maven Clinic).

Introduction: Start-ups in a Changing Venture Landscape

For the first time since 2017, the pace of unicorn creation has slowed down drastically, reflecting a fundamental shift in the venture capital landscape. In 2022, only 244 unicorns were created globally, a sharp decline from the 542 added in 2021 according to Moneycontrol. This shift indicates more than just a downturn in funding, it reflects a broader re-evaluation of priorities within venture capital. The focus is pivoting toward a new paradigm that emphasizes sustainable value creation over rapid growth, a trend that aligns with the emergence of the “Intelligent Age”. Long-term resilience is now becoming the goal, with more investors prioritizing profitability, ethical practices, and alignment with societal needs. Companies addressing global challenges, such as climate change, healthcare access, and education equity, are increasingly securing investor backing. This shift is partly due to the recognition by venture capitalists that these social impact-focused startups represent not only opportunities for measurable societal benefits but also strong financial returns. As markets for clean energy, telehealth, and educational technologies rapidly grow, these startups are seen as critical drivers of the future economy. For instance, the Global Impact Investing Network (GIIN) reported that impact investments globally are valued at over $1.57 trillion, underscoring the rising demand for ventures that deliver measurable social and environmental impact alongside financial returns. In this evolving landscape, start-ups are no longer judged solely by their ability to scale quickly, their role in addressing societal challenges is becoming increasingly vital. Entrepreneurs must navigate this complex environment to secure the capital needed for innovation. Exploring funding models that balance financial sustainability with meaningful impact is essential for building a resilient, future-focused start-up ecosystem.

Funding Models for the Future

Rethinking Venture Capital’s Role

Investors are increasingly moving away from traditional "growth-at-all-costs" models and adopting funding approaches such as revenue financing and evergreen funds that prioritize sustainable, long-term growth. Revenue-based financing is a model which operates on the basis of investors providing capital today in exchange for a percentage of future revenue tomorrow. The United Nations’ Financing Sustainable Development Report highlights how revenue-based financing models are particularly seeing traction in emerging markets as they provide patient capital that does not place pressure on quick exits allowing new ventures to focus on value creation above all else. Another funding approach gaining traction is evergreen funds, these are open-ended investment vehicles that do not have a fixed horizon for returning capital to investors, unlike traditional venture capital funds that often operate on a 7-10 year lifecycle. Instead, these funds reinvest the returns from successful investments back into new ventures, creating a self-sustaining cycle of funding similar to those of non-profits.

The rise of revenue-based financing and evergreen funds aligns closely with the growing prominence of social enterprises in today’s start-up ecosystem. Social enterprises blur the line between for-profit and non-profit organizations by combining sustainable revenue generation with a mission to address societal or environmental challenges. The global social enterprise sector, valued at $2 trillion annually, exemplifies the potential for innovation to drive both economic and societal progress. As venture capital adapts to support these impact-driven businesses, it reinforces the notion that innovation can be a vehicle for both economic growth and meaningful change.

Strengthening the Start-Up Ecosystem

Governance as a Growth Driver:

Strong governance is increasingly recognized as a cornerstone of successful start-ups as it creates a foundation of trust and accountability essential for long-term growth. Transparent governance frameworks enable investors and founders alike to align visions, capital, and outcomes, reducing conflicts and ensuring shared goals. In volatile markets, robust governance helps enhance resilience by providing clear decision-making structures and risk management processes. It also addresses concerns about ethical practices, sustainability, and compliance, which are critical for attracting investors and scaling sustainably.

Resilience Through Collaboration

Multi-stakeholder workshops across the United States have brought together over 125 industry leaders to address challenges facing the venture capital industry. For instance, the 2024 North American Stakeholder Forum, organized by the Standards Board for Alternative Investments, convenes institutional investors and managers to discuss key issues and opportunities in the investment landscape. Similarly, the UN Technology Facilitation Mechanism serves as a global platform for collaboration, enabling stakeholders to share best practices and policy advice to tackle global challenges. These discussions highlight the importance of partnerships between founders, investors, and other ecosystem players in driving sustainable growth. By fostering dialogue and sharing insights and resources, these initiatives exemplify how the start-up community can collectively navigate the challenges of a changing economic landscape.

Unlocking Long-Term Success

The Role of Policy and Innovation Hubs

Policy interventions and innovation hubs have emerged as critical drivers of start-up success by fostering environments that promote innovation and resilience. Government initiatives like Canada's Innovation Superclusters Initiative, have invested $950 million across digital technology, protein, advanced manufacturing, AI, and ocean sectors. These superclusters have generated over 100 projects and supported thousands of SMEs across Canada to date.

Innovation hubs also go beyond funding, fostering collaboration between start-ups, academic institutions, and established corporations. For example, the Advanced Manufacturing Supercluster has spearheaded projects that integrate emerging technologies like robotics and 3D printing into traditional manufacturing processes. This not only drives technological adoption but also creates new opportunities for regional economic development. By connecting resources, talent, and innovation, policy-backed innovation ecosystems ensure start-ups have the tools they need to succeed in a complex and rapidly changing market.

Conclusion

The evolving start-up ecosystem reflects a broader shift toward sustainable innovation and collaborative growth. Investors, founders, and policymakers must work together to create funding models and governance frameworks that support long-term success.