The new startup survival guide: margin over momentum

Entrepreneurs are reshaping their growth strategies as the prospect of higher interest rates makes funding harder to secure and talent more challenging to access. New EY-Parthenon research shows that while ambition remains a driver for most founders, they are being more careful about how and where they invest.

Lack of capital access reshapes growth plans for founders

Entrepreneurs are having to be even more selective and pragmatic about where they pursue growth as investor expectations evolve. Fifty-nine percent of entrepreneurs surveyed say access to growth capital is more constrained than it was 12 months ago and compared with CEOs of larger organisations, surveyed entrepreneurs are also more likely to cite reduced access to capital as a significant risk, at 20% versus 11%. This reflects a shift in investor expectations as capital becomes more expensive and harder to access.

Changes in funding conditions have led to founders prioritising initiatives that strengthen margins, improve cash flow and build long-term resilience over rapid expansion. Ninety-one percent say disciplined growth and a clear route to profitability now matter more than expanding quickly into new markets.

Andrea Guerzoni, Global Vice Chair, EY-Parthenon, says: “For entrepreneurs, growth is still the goal, but tolerance for missteps has narrowed, making execution, quality, and financial control more important than headline expansion. As market volatility becomes the norm, many scaleups are operating close to the financial edge and are more at risk of external shocks. Success is not about the pace of growth alone, but by the resilience to absorb shocks and sustain momentum through uncertainty.”

AI investment becomes standard, results become the test

AI is now part of the core business toolkit for entrepreneurs. Eighty percent of those surveyed plan to increase AI investment in 2026, matching the pace of larger organizations and signalling near-universal confidence in AI as a driver of productivity and growth. Furthermore, surveyed entrepreneurs are allocating AI investment almost evenly across priorities from efficiency plays (26%) to using AI not only to improve efficiency, but to redesign service delivery, accelerate productivity and create new revenue opportunities (25%).

However, the research suggests that adoption alone is no longer enough. Many founders are still working out how to track whether AI is improving revenue, productivity or margins. As investor scrutiny increases, founders are under greater pressure to prove that AI investment is translating into measurable business outcomes, whether through revenue growth, productivity gains or margin improvement. As capital tightens, the ability to link AI spending to clear business results is becoming a critical advantage.

Stasia Mitchell, EY Global Entrepreneurship Leader, says: “For most entrepreneurs, AI is no longer a question of whether to invest, but where it will make the biggest difference. What stands out is that many founders are still working out how to prove the value of those investments. As expectations around ROI increase, AI investment must show measurable impact. Founders are increasingly expected to connect AI spend directly to revenue growth, productivity or margin improvement. The entrepreneurs pulling ahead are building measurement into their AI strategy from day one.”

Talent and capability remain a constraint

Building the right skills remains a challenge. Entrepreneurs are more likely than large companies to face shortages in AI and data expertise, while also having smaller teams and fewer layers of support. Twenty-five percent of entrepreneurs surveyed identified limited AI and data skills in their existing workforce as the main talent constraint on their ability to generate value from AI, while 20% say maintaining entrepreneurial culture during AI-driven change as their main roadblock to transformation.

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As a result, many founders are responding by retraining existing staff, hiring specialist talent and redesigning roles to make better use of technology. Forty-six percent of entrepreneurs surveyed responded that reskilling and upskilling of existing employees is driving their workforce strategy and 41% are redesigning roles to combine human and AI capabilities.

Entrepreneurs take cautious approach to strategic partnerships

The clearest point of difference between entrepreneurs and CEOs of large enterprises is their approach to partnership. Only 32% of entrepreneurs surveyed plan to pursue strategic alliances, compared with 57% of large company CEOs surveyed. CEOs are also far more likely to explore joint ventures at 45% versus 26% of entrepreneurs. This cautious approach toward partnerships reflects the pressure many founders face to move quickly, preserve agility and maintain control while operating with leaner teams and limited management bandwidth.

Andrea Guerzoni, Global Vice Chair, EY-Parthenon, says: “Entrepreneurs are doing the hard work on talent by reskilling teams, redesigning roles and finding ways to embed AI without losing the culture that drives their success. But skills alone will not close every gap. As technology becomes more complex and capital more selective, partnerships can offer a faster route to capability, scale and resilience. Many founders remain cautious, but those willing to use partnerships more deliberately may find they can move further and faster than they could on their own. These kinds of alliances are an underused lever for founders, offering access to a broader ecosystem to power scale, skills and market reach without the cost or complexity of building everything alone. The challenge for most will be doing this at speed, without losing the agility and culture that helped the business grow in the first place.”