Many founders will be concerned by recent economic news. VC funding levels have dropped, a number of startups have cut staff and consumer sentiment has taken a turn for the worse. That is not to say all is lost. This tech recession is not going to hit the depths of those of 2008 or 2000. Europe’s tech industry is in a much stronger position. Nearly every sector - from travel and hospitality through to insurance, logistics and finance - now has tech deeply embedded in their business. There are thousands more startups, tens of thousands more tech workers and many billions more in capitalisation. Some industries will be hit harder than others. But thanks to another recent development, in the shape of alternative finance, well run startups have a good chance to both weather the economic storm and continue to grow while VC capital dries up.

Alt finance is designed for the needs of founders, and has been built around creating success for startups:

You stay in control

This is the most obvious advantage of non-dilutive funding: you don’t give up any equity in exchange for capital. Having investors on board can be great. In many cases their advice is invaluable. However, it can be tricky if their views conflict with your own. For example, they may be taking a more short-term approach to growth and profitability to ensure a quick return on their investment, which is at odds with your long-term ambitions. This can be particularly apparent in a recession: conventional thinking says to cut staffing, whereas you may prefer to grow your way out of trouble.

It saves you time and money

Fundraising is a time consuming and often stressful process. The never-ending meetings and pitches. The complex cost-benefit analysis of each deal and the expense of legal and other compliance work. One of the virtues of many alt finance options is their simplicity. For example, recurring revenue financing enables startups with monthly revenue from contracted clients to access financing based on this expected turnover. From start to finish the process can take a few days, versus the months most rounds take to close.

It’s about your business, not the wider economy

One of the big problems of the 2008 tech crash was that funding dried up to such an extent that hundreds of entirely viable startups were taken down too. It won’t happen this time. Most alt finance solutions base their assessment on your actual business fundamentals. This is in contrast to more traditional funding routes that can be swayed by hype, competition and wider economic sentiment. In good times, if you operate in a ‘hot’ sector, this may mean a lot of capital with great terms. But in trickier times, or if you work in a less ‘exciting’ space - it can mean your startup gets pretty unattractive funding offers. Alt finance takes the bias out of the equation. If you are well run and profitable, there will be capital on hand for your startup.

You can make a little go a long way

Funding rounds are often as much about what a startup needs in order to achieve its immediate goals as reputation, so it can be easy to be encouraged to go for bigger rounds and more than required. It’s also worth remembering, with inflation set to soar, having a large pile of capital you don’t need sitting in your bank account isn’t the best option: it’s only going to lose value. But what if you need a relatively small injection of capital? You may need to open a new office, service a major new client or simply gain peace of mind that your business will be safe during the recession. Alt finance enables you to secure exactly the amount of capital you need and in some cases allows you to pay it back early without penalty.

You have more options

We’ve already touched upon some of the difficulties equity funding presents. There are similar issues with traditional financing. Banks can be slow. They also struggle to understand tech startups, which can make them reluctant to lend. Alt finance has been built around tech companies. Rates are often lower than anything available from banks, and repayment terms are often easy to adjust. This flexibility can be invaluable.