The Fed’s recent rate cut has sparked headlines about recession risks, but beneath the noise, the U.S. economy is holding stronger than many realize. In this episode of Startup Success, Burkland COO Steve Lord breaks down what’s really happening in the markets, how macro trends ripple into fundraising, and what founders should (and shouldn’t) do when raising capital right now.
Why the Economy Is Stronger Than the Headlines
Despite market jitters, the U.S. economy remains fundamentally healthy. Steve points to equity markets as a forward-looking indicator. While pundits warn of slowdown risks, the S&P has logged one of its longest recent streaks without a single-day drop of more than 1%. That’s not what a collapsing economy looks like. As Steve reminds us, “bull markets climb a wall of worry.”
…the S&P has logged one of its longest recent streaks without a single-day drop of more than 1%.
Businesses are still planning for future demand, unemployment remains steady, and many of the alarmist takes about the economy don’t align with underlying data. On top of that, the dollar is expected to remain weak as the Fed continues its easing cycle. Rather than a crisis signal, a softer dollar actually stimulates growth by making U.S. exports cheaper and more competitive globally.
For founders, the lesson is clear: don’t let headlines dictate your strategy. Focus on the fundamentals driving your business, and pay attention to the real indicators that matter for growth and fundraising. Interest rates and tariffs both take 12–18 months to fully ripple through the economy. The effects of today’s moves won’t be visible until well into next year, meaning founders should plan ahead rather than react to short-term headlines.
Fundraising in 2025: A Tale of Two Markets
With venture activity still sluggish, Steve explains that founders today are navigating “two markets”. Traditional venture funding across most sectors has slowed, with many rounds taking longer to close, valuations tightening, and more than 20% of deals coming in flat or down. The major exception is AI, where capital is flowing freely and valuations remain at a premium. In fact, AI deals have been large enough to skew industry-wide charts.
“Probably the easiest way to sum it up from fifty thousand feet is that it’s really two markets.”
For everyone else, the environment is more cautious. Steve warns founders against panic-driven fundraising moves, like rushing into the market at the last minute. Even companies with excellent metrics, strong teams, and proven traction are seeing fundraising processes stretch to nine months or longer. Entering that process unprepared or too late can put a startup in an impossible position.
Advice for Raising Capital Now
1. Understand Which Market You’re In
Given today’s “two markets,” founders need to calibrate their fundraising strategy to their reality. If your business is AI-driven or can authentically show how AI is being embedded in your product or operations, you’ll find more open doors. Investors are rewarding those stories, often with faster processes and stronger valuations.
For everyone else, capital is harder to come by, which makes discipline and preparation essential. Don’t rely too heavily on vision without hard numbers. The “raise on a pitch deck” era is over. Today’s investors want detailed KPIs, proven economics, and evidence of execution. Forget 40-slide decks heavy on vision statements. Today’s market demands clarity and data. Investors want to see:
- A concise story
- Clear KPIs and traction
- A realistic pathway to growth
Concept and vision still matter, but they must be anchored in numbers and evidence.
2. Start with Your Current Cap Table
Steve recommends starting with your existing investors. They already know your business, have capital at stake, and share your interest in protecting its future. If your current backers aren’t willing to participate in the next round, that’s the first red flag new investors will see. Strong internal support sends a powerful signal of credibility and makes it far easier to bring in fresh capital.
To get there, early and frequent communication is essential. Even if you’re not raising yet, think of your cap table as a future pipeline. Share updates regularly—both the wins and the setbacks—so investors understand where the company is headed and feel invested in the journey. Surprising your investors only when you need money is a recipe for skepticism. By contrast, building trust through transparency creates a base of allies who are more likely to backstop a new round or advocate for you with their networks.
Steve also notes that these conversations can open the door to critical strategic input. Investors often see emerging market signals before founders do, and they can help you test the viability of a pivot or refine your growth plan well ahead of your next raise. The sooner you bring them into that process, the stronger your positioning will be when you formally hit the market.
If your current backers aren’t willing to participate in the next round, that’s the first red flag new investors will see.
3. Know When to Consider a Pivot
In today’s cautious environment, sticking too long with a strategy that isn’t working can be fatal. Steve emphasizes that founders shouldn’t wait until they’re nearly out of cash to rethink direction. If growth is flat or product-market fit hasn’t materialized, start the conversation with your investors early. They’ve often seen similar situations play out and can help guide tough choices. While pivots are never easy, making the move proactively and with investor buy-in can transform fundraising prospects and keep your company positioned for long-term success.
Don’t assume that today’s market won’t fund you. There is record dry powder waiting to be deployed, but investors are being selective. The companies that win capital are the ones that enter the process with a tight, data-driven story and clear evidence of traction.
Know which market you’re in, set expectations accordingly, and build your fundraising plan around timing, transparency, and proof.
Venture Capital Isn’t Broken, it’s Cyclical
Above all, Steve reminds founders not to buy into the hype that venture capital is collapsing. “The venture model is not broken,” he says. “It’s just got macro headwinds on it right now.” History shows this cycle clearly: periods of low interest rates and easy money drive a boom, followed by a pullback as rates rise and capital tightens.
“The venture model is not broken. It’s just got macro headwinds on it right now.”
What would spark the next rebound? Several factors could contribute:
- Rate cuts that stick: If the Fed delivers multiple cuts into next year and inflation stays in check, the cost of capital will fall, and investors will be quicker to deploy.
- Stronger economic signals: Continued job growth, steady consumer demand, and corporate spending plans would reinforce confidence.
- Dry powder release: Venture funds are sitting on record amounts of unallocated capital. Once confidence improves, that capital will flow more freely.
- M&A and IPO activity: A pickup in exits gives VCs liquidity and refreshes their incentive to reinvest.
Steve notes that this ecosystem has always followed the broader economy. Just as we saw in the years after the 2008 financial crisis, today’s downturn is the hangover after a party, but the next upswing is coming.
Prepare now. The companies that build strong fundamentals, communicate openly with investors, and stay alive through the slowdown will be first in line when the rebound arrives.
Intro 00:01
Welcome to Startup Success, the podcast for startup founders and investors. Here you’ll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world, stories that will help you in your own journey. Startup Success starts now.
Kate 00:18
Welcome to Startup Success for back with one of our most popular guests, Steve Lord, the Chief Operating Officer at Burkland. Thank you so much for being here today. Steve also runs our knowledge share practice, which keeps all of our CFOs, accountants, everyone working with clients up to date on all the latest and greatest in the startup ecosystem. Steve, welcome back. Thank you for being here. (Awesome. Thanks for having me.) Yes, we’re going to delve into the current state of things and the recap, after Q3. I mean, where are we with the economy? Q3 is ending.
Steven Lord 00:58
Yep and anybody who’s paying any degree of attention knows that the market is fixated on the jobs numbers and the inflation numbers, right? Those are the two things that are alternatively driving the political discourse and the pressure on the Fed and internally within the Fed itself, right? We did get a cut, which was awesome. We’ve talked on this program several times about when that was going to happen, so I was really glad to see it was, I feel a little bit more of a kind of a sop to the pressure. I don’t know if they actually had data that needed to push that, because remember, what the mandates are: full employment and low inflation. And there’s this shadow third mandate that they went back and dug out of the I think, the Federal Reserve Act in the 30s. That speaks to low long term interest rates. Now we haven’t really talked about that ever. From Fed watchers for 30 years, I’ve been doing this a long time. There’s never really been a lot of discussion around how the Federal Reserve could manipulate long term rates. But there is a thing there, if they were able to start doing that, that would trickle its way through the economy. One thing I want to call out, though, is, yes, we got a rate cut. Yes, we’re probably going to get at least two more, maybe three into January of another 75 basis points, maybe 100, but I think for us to really go beyond that, we’re going to have to see, you know, it’s kind of like, be careful what you wish for, because you’ll have to see a dramatic deterioration in the underlying economy. So everybody’s like, lower interest rates, yay. Well, yeah, but hold on, right, because they’re only really doing that if they are worried about where things are going to go. Two other quick points, the two big levers that we’re all talking about right now, the interest rates and the tariffs. Both of those take 12 to 18 months to percolate all the way through an economy. Okay, so the interest rates that we’re lowering now are going to be visible a year from now. The tariffs that we put in in April and May are going to really start showing up in the beginning of the spring. There is a gestation period to these things that virtually everybody pounding away on their keyboards online don’t really talk about, right. Don’t look at inflation now to see whether tariffs are impacting it. It’s going to be inflation in March that shows up, and that’s what the Fed is worried about, right? They’re not going to cut interest rates like crazy because they know that that is coming. So it’s a complicated time. The economy, I’ll also just call out, is in good US economy fashion is typically stronger than the rhetoric. Once in a while, you’ll see it the other way, but it is usually such that we almost talk ourselves into recession. Underlying economy is still doing pretty well. You know, we hear a lot about these folks that can’t find jobs and all that sort of stuff, and we’re hearing a lot about how the Bureau of Labor Statistics doesn’t know where it’s getting its data from, and that’s fine, but it’s not different, right? The big thing with the Fed is, is it any different than 10 years ago? The answer is no. So underlying economy is still actually pretty healthy. Go forward, economy, interest rates, inflation, and to be honest, the political pressures around those two things are things to watch.
Kate 04:04
Okay. Because that was my next question. You know, they did that small rate cut, and then everyone starts talking about recession jitters, like immediately, but you’re saying it’s still underlying healthy, it’s more like long term.
Steven Lord 04:20
Yeah, because remember, what drives the economy going forward are businesses acting on anticipated needs, right? So things like the stock market are great forward indicators. A lot of people are talking about how the economy’s going to go down the tubes, but then you’re looking at the equity market is continuing to do really, very well. I think we’re on, I can’t remember the exact statistic, but it’s the longest S&P streak in at least a year or so without a down day of more than a point or 1%. So that’s telling you something. There is a split there.We can worry about the economy all we want, but don’t forget one of the great Wall Street. Street sayings is bull markets climb a wall of worry. So everybody’s wringing their hands going, oh my god, it’s all terrible. It’s all going to fall apart. We’re all going to lose our money. The world’s going to crash and the equity market continues to go up. That’s actually very common. Just bear in mind that the forward, the way economies realize what they are going to do is businesses acting on their planning. So right now, a lot of businesses are still in that place we were worried about last time we spoke, where they don’t really know what’s going to happen, so they’re just waiting. And we’re seeing that start to show up in some of the surveys.
Kate 05:37
For sure. It feels like with the rate cut, just talking to people in the industry, people immediately became more cautious,
Steven Lord 05:45
And that’s a natural reaction, because, you know, Wall Street does this too well. What does the Fed know that we don’t know, right? But in this case, I feel like a lot of the folks that really watch this know what that rate cut was really about. It was really about getting the wall White House off their backs. (Right. The political pressure.) Now, to be honest, that is a dynamic that I have never seen. So that’s new, that that is a thing that we have to handicap as some sort of exogenous influence that hasn’t really been there, at least not overtly. There’s always been accusations that Feds were political here or there, but broadly, they have been resolutely independent, and I think that independence is still intact, but this is certainly kind of new territory for for the Fed. Last thing I’ll throw out there, related to all of this stuff, is, watch the dollar. The dollar will continue to be weak, right? If we’re on an easing cycle, you’re seeing these other economies changing their interest rates in response to what we’re doing, that the dollar will probably continue to run into exchange rate issues. However, that has a stimulative effect on the economy, because it makes our exports cheaper. (Oh, right.) Don’t forget, a weak dollar. Don’t read into the online you know, sky is following stuff. It’s actually in the United States economy, interest if the dollar drops.
Kate 07:05
That’s true. That’s a good point. Okay, so that’s helpful to set the stage for the economy. Let’s go into the world of startups. What is going on with VC investing?
Steven Lord 07:19
Probably the easiest way to sum it up from 50,000 feet is it is really two markets. We’ve talked a lot about how the venture ecosystem is sort of stalled waiting for shoes to drop, and I think that’s still broadly true, except AI. If you are AI, you look at the charts, and they’re all open to the right, the number of deals, the value of the deals, the premiums, in terms of valuation on those deals. We’ve had mega fundraisings from Open AI and some of these other companies that have really skewed a lot of the numbers. You take those out of the chart, it’s still pretty flat. It’s just really not getting much traction. So I think the message for our founders is, I mean, it’s kind of twofold. If you can put AI into your business to figure out a way to do it, because you’ll get, you’ll be able to raise money easier for it, right? (Everybody add a slide about AI to their pitch decks.) Get it in there. I mean, you know, we had some conversations internally about this, AI is going to end up being even more this way than FinTech was, right? When FinTech first came out, everybody thought it was just going to be lenders and banks. But then eventually, I think it was Andreessen Horowitz that coined that “every business is a FinTech now,” right? Every business is going to be AI, that’s going to happen one way or the other, either you’re selling it or you’re using it right, one way or the other. So I think it’s not a stretch to start trying to figure out ways to incorporate it. If you aren’t doing that, we do see companies getting funded, but it’s going to take longer. It’s going to be harder. Your valuations are going to be more difficult. If you are looking for additional fundraising, it’s still very likely, I think it was more than 20% of all rounds right now are either flat or down, so you’re going to need to adjust your expectations around what getting new capital into your business will look like.
Kate 09:09
Yeah, if you want to fundraise, or you have to fundraise, you adjust your expectations. But any other advice there?
Steven Lord 09:16
What we’ve seen is largely the folks you already have on your cap table are probably your best bet. They have an investment to protect. They know you. They know the business right. Have really candid and honest conversations about their willingness to backstop another raise. It’s always easier to raise money if your existing investors are re-upping for a new round. If you don’t have that, you already have a strike against you. Because the first question that comes to a new investor’s mind is, well, then why aren’t these guys? If you’re so great, how come these guys aren’t putting up more money? So I would start there and accept the fact that you might have the most amazing idea under the sun, but the environment is one that’s going to look at you skeptically. So you have to be even better than normal. So even more sure of your case, you have to illustrate the KPIs, data driven all of those things to convince people to write a check.
Kate 10:08
To go back to your first point. I thought that was a really great tip for founders listening to start with your current cap table. It makes me think that even if you’re far from your next round, you should be then communicating pretty actively with your investors, and like thinking of them as that future pipeline, right?
Steven Lord 10:30
You bet. You bet. I mean, you should be doing it anyway, but in this context, absolutely. And you know, one of the things we’ve also seen with some of our founders is, you know, you’re going to have to have to raise money in a year, right? You built the product, the products out there, it’s, it’s okay, you know, maybe it’s growing a little bit, but you’re not, you haven’t found the secret yet. It’s not, you’re not blowing the doors off yet. Talk to them early about pivoting. I mean, if you, if you feel like the business needs to go in a different direction to hit the kind of numbers that will enable that fundraising to happen and everybody to have the outcome you want. Don’t be afraid to do that. They have the same interest in that outcome that you do. So founders, sometimes, you know it’s like with the equity market, you sort of fall in love with the stocks you buy. Sometimes, we’ve seen founders stick with the core idea a little longer, maybe than they should have, and then they are on their back foot, and now they’re almost out of money. Now they have to raise, now the business doesn’t really have good metrics to show for it. Now you’re really in a tough place.
Kate 11:30
I’m really glad you called that out, because just on this show, we’ve spoken to so many founders who said they made a pivot early, and even though it was so hard and scary. It really paid off. So if that’s what your gut, you’re feeling it, and I love your idea about talking to some of your you know, early investors about it.
Steven Lord 11:52
They know, especially if you have the traditional sort of venture backing that many of our clients do. The investors on your cap table know more about raising money, probably than you or your management team. If you’re a founder, listen to them. They will start telling you what’s going to be doable in a year or eight months. We had one client recently that finally closed a seed round. It took them nine months, and they have some of the best metrics I have ever seen. And it still took them nine months. So folks, you got to be, if you’re gonna be in it, you gotta be out there thinking now. I don’t really even care how much money you have in the bank, you need to be thinking about talking to your investors about what’s next. (Nine months?) Yeah, nine months, and they have a great story. So it’s one of our CFOs. They’re working with one of the best folks on our team. Their deck is tight, their product is working, their sales velocity is high, their team is excellent. I mean, excellent team, right? All the right things. Nine months.
Kate 12:58
So you have to get out there, probably sooner than you think, start the process, sooner than you…
Steven Lord 13:06
At least the conversation with your existing investors, right?
Kate 13:09
Okay. And as far as your deck, the second point you made that I thought was really good, was you really focus on KPIs, metrics? Give them a lot of like, hard data on why your decision.
Steven Lord 13:27
So dry powder is really still at a record. By vintage, it’s even wider than it used to be. So older funds are carrying more capital. The corporate environment so that think of the Metas and the Googles and the Intels, the folks that come alongside and invest in these companies too, they’re getting more active. And they’re able to stay with a client, with a portfolio company, all the way through an IPO and beyond, right? So, but the venture dry powder, the unlocking of that sort of capacity, really, if you expect them to buy into your vision, it’s not the right marketplace for that. That was 2018 that was 2021 where, if you were an AR company, you could raise money on a pitch deck, right? Now, it’s you gotta have the vision, sure. You have to have the team. You have to have the economics figured out. But you have to have, and this is such an important point, clearly and succinctly delivered pathway to getting the company where you want it to be, right. Because right now you’re going out to the market with a 44 page deck, it’s not going to work. It’s really not going to work. Unless it’s being carried to a new VC by one of your existing investors. Maybe then. But it’s got to be tight, really close, lot of data, lot of knowledge. Sure, have the concept there, but back it up with information. And it sounds simple, like, I’m sure everybody listening to this is like, Well, yeah, of course, right. You’d all be surprised what founders put in their deck, because I get it, I mean they we love the ideas that we come up with, right? We believe in them, and we believe in ourselves and our team. And so a lot of decks have a higher proportion of kind of the pie in the sky, you know, right? Like, I remember the crypto, a crypto deck I got years ago, where the first three pages of the deck were about how, you know, this is the libertarian revolution, and we’re going to democratize money. And this company was going to put MasterCard out of business, and they lost everybody by page four. You know, it just wasn’t, yeah.
Kate 15:39
That’s really helpful. I think you laid out some really good advice there. Anything else as we wrap up? I’ll talk to you again next quarter, but yeah.
Steven Lord 15:49
I’ve said this for several of these episodes, and I’m just gonna say it again. Venture, startup financing, growth company financing, growth PE, that little corner of the broader market is cyclical. Okay. It doesn’t feel right now. It feels very kind of like a U, right? But it is a cyclical industry. It follows rates. If we do get three or four rate cuts coming into the spring of next year and these other economic indicators, we’re kind of balancing that line successfully. This ecosystem will turn. Staking my credibility on it, it will. The venture model is not broken. It’s just got macro headwinds on it right now. And that’s you could go back through time and see it on the charts.
Kate 16:31
That feels good to hear, because it’s the bottom of the U. It’s good to hear that the venture market, people need to remember, follows macro trends.
Steven Lord 16:43
It is a cyclical industry, right? It’s like aluminum and steel and copper and all these other things. Plus many of the listeners probably weren’t active in the market at the time, but if you go back to post financial crisis – 2012, 2013, 2014 – we had zero interest rates for years, and we were at the top of a cycle, right? And nobody’s remembering that part. This is the answer to that. There’s a hangover after every party.
Kate 17:10
All right. I like it. That’s the optimism that we can take. So I appreciate that. That’s helpful. Yeah, always great to see you.
Steven Lord 17:17
Thanks. Looking forward to coming back.
Intro 17:20
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