This article explores how startups are being reshaped by a world where capital is no longer abundant, and easy money is no longer the norm. What happens when growth must be earned, not subsidized, and how can constraint become a competitive advantage?
Mohit Agarwal is a Transformation leader in a large Private Credit firm, where he drives business change and transformation for a set of global businesses. Previously, he led Transformations for a global management consulting firm based in New York.
Until recently, capital was cheap. Not long ago, “growth at all costs” wasn’t just a strategy; it was the strategy. Founders were encouraged to blitzscale, raise pre-emptive rounds, burn hot and heavy, and trade that burn for top-line expansion. That world is gone – “burn” used to be a badge, now it just burns.
Interest rates are up. Investor sentiment is cautious. The world is trying to figure out the macro landscape. Startups that once raised with a pitch deck now struggle to get a second meeting. And suddenly, transformation is no longer optional—it’s survival.
But behind every shake-up, there’s a silver lining and an opportunity, and there’s one here too. Scarcity isn’t just a constraint. It’s a forcing function. It separates noise from clarity, bloat from necessity, and vanity from value. In this new paradigm, transformation under pressure isn’t just possible, it might be the best thing that’s ever happened to your startup.
I’ve seen this happen many times before, and this time is no different – as long as you’re aware of it, and play to win.
In the 2020 to 2021 funding boom, startup economics all over got distorted and warped. Teams scaled ahead of traction, revenue, and profits. Valuations stretched far beyond fundamentals (multiple of revenue became the measure of choice). Hiring exploded, and burn became a badge of ambition. You were measured by how much you spent, how many people you hired, and how visible you were.
But macro conditions have meaningfully shifted. VCs are sitting on dry powder, but deploying slowly. Secondaries are soft. The IPO market remains shut. Follow-on rounds aren’t guaranteed. Today’s environment demands something founders haven’t been asked for in a while: discipline.
Transformation is no longer a fancy word or a strategic initiative to be pursued in the distant future. It’s happening on the shop floor, in founder calendars, in board rooms, and in cap tables and cash flow statements. I’ve seen it personally in the startups I advise and mentor.
Here’s what that transformation looks like:
1) Changing focus from Headcount to Output
In flush times, teams scaled to signal growth. Now, the focus is very different - how lean can you stay while still delivering impact? Startups are asking: “What does each person ship?” or “Is this person earning their keep?”, not “Who do we need next?”
Lean teams mean tighter feedback loops, lower overhead, and faster execution. Now, every hire must be justified and “earned”.
2) Getting to Breakeven fast
Gone are the days when your runway was someone else’s problem. Founders are revisiting every cost line, no matter how small. They’re out there renegotiating contracts, cutting tools, and pushing toward break-even far earlier in the journey. Being “default alive” isn’t just a fundraising advantage anymore; it’s a mindset shift. It forces smarter prioritization, cleaner metrics, and real-time accountability.
3) A stricter definition of “Must-Have”
Buyers are scrutinizing spend. If your product is a line item that doesn’t tie clearly to ROI, it’s gone. That forces a rethink among product founders - what core pain are we solving? What’s our customer’s “hair on fire” moment? Will we not be ripped out in the next cost review?
Startups are narrowing their value prop, doubling down on ICPs, and killing features that don’t sell.
4) Ditch the vanity
In an up market, you can afford to chase every metric. DAUs, signups, and social proof (incl. the number of podcast appearances) all look good on a deck. But now? The only numbers that matter are those that convert.
Founders are letting go of pet projects, killing marketing fluff, and redirecting efforts toward traction, retention, and revenue.
Consider a startup in the food delivery sector, competing in a brutally competitive market with rising customer acquisition costs. At one point, they faced a decision: invest remaining capital into slick branding and influencer campaigns, or double down on improving the actual delivery experience.
They chose the latter - simplified checkout, added real-time driver tracking, and improved accuracy in estimated delivery times. The result? Repeat usage increased, churn fell, and customers started spreading the word.
They didn’t “go viral”; instead, they went deeper. And that depth, forced by budget constraints, built something more valuable than flash ever could.
It doesn’t feel like it, but pressure creates diamonds. And this capital constraint is quietly reshaping the next generation of startups into sharper, smarter, more resilient businesses.
Here’s why that matters:
This isn’t a phase. It’s a reversion to fundamentals. The startup playbook has always had two versions: one for frothy markets and one for real ones. We’re back to the latter.
So what now?
In this market, the best companies aren’t trying to look big. They’re trying to be right. And that’s a far better goal.
Let me be very, very clear - this isn’t a call to austerity for its own sake. It’s a reminder that grit, not gloss, often builds the companies that last. This pressure you might be feeling is the beginning of a stronger, smarter, more focused version of your business. It’s transformation in the purest form, forced not by strategy slides, but by reality.
And if you let it, this pressure might just be your unfair advantage.
Alchemist connects a global network of enterprise founders, investors, corporations, and mentors to the Silicon Valley community.
Alchemist Accelerator is a global venture-backed accelerator focused on accelerating seed-stage ventures that monetize from enterprises (not consumers). The accelerator invests in enterprise companies with distinctive technical founders and provides founders a structured path to traction, fundraising, mentorship, and community during the 6-month program.
AlchemistX partners with forward-thinking corporations and governments to deliver innovation programs worldwide. These specialized programs leverage the expertise and tools that have fueled Alchemist startups’ success since 2012. Our mission is to transform innovation challenges into opportunities.
Join our community of founders, mentors, and investors.