The U.S. stock market is going through another correction, stirring concern among investors. But for startups and venture capitalists, market volatility is nothing new. The past five years have seen constant ups and downs, and while it’s hard to predict a bear market, preparing for one is completely possible.

Venture capital funds currently hold $308 billion in dry powder—almost three times more than before the pandemic. That means funding is still out there. The key is knowing how to avoid common mistakes and make smart moves when things get rough.

Mistakes to Avoid During Market Volatility

Spending like it’s still a boom: In uncertain times, funding gets harder to secure. Founders must reduce costs early rather than risk running out of money. It’s a tough decision but necessary for survival.

Cutting the wrong things: Some startups try to extend their runway by removing core features, slowing growth, or letting go of critical talent. This can turn a promising startup into a stagnant “zombie” company that struggles to recover.

Ignoring the market shift: Founders often overlook how public market swings affect startup valuations. A dip in tech stocks can lower startup valuations, especially for later-stage companies. Some avoid raising flat rounds, hoping for better terms later, but this risks running out of capital altogether.

What Startups Should Do in Unstable Markets

Set one clear goal: Choose a critical milestone—like launching a key feature or landing a major client—and stick to it no matter what. This gives your team focus and keeps investors engaged.

Prioritize spending: Once your main goal is set, cut nonessential expenses. Focus your time and money on what moves the needle. That might mean delaying experimental projects and focusing only on what directly supports growth and survival.

Get investor feedback: Ask investors if your milestone is impressive enough to set your startup apart. If it stands out in good times, it’ll stand out even more when market volatility hits.

Build investor relationships early: Don’t wait until you’re desperate for funding. Start connecting with VCs ahead of time and research who has the capital to back you in a downturn. Prioritize investors with strong cash reserves.

How to Stay Top-of-Mind with Investors

In tough markets, investors focus on companies showing real progress. If you’re not yet growing rapidly, you can still stand out by showing that:

• You’re solving a big, important problem
• You offer something competitors don’t
• You’re making smart, fast decisions
• You keep investors updated and involved

Show that you’re realistic, committed, and ready to make hard calls when needed.

Market Volatility Can Be an Advantage

While downturns can wipe out weaker startups, they also give stronger ones room to grow. If you’re focused, lean, and prepared, market volatility can be your opportunity—not your downfall.

Startups that act early, adjust fast, and keep investors close will have the best shot at not only surviving but thriving in uncertain times.