Inflection Point Data – What’s Currently Impacting Tech Businesses
Various winds buffet tech businesses, but never have they swirled this quickly. Let’s take a look at 10 critical factors that are driving the need for growing companies to adapt or change around the tornadic inflection points they currently face.
1. Securing Follow-On Funding in a Tight VC Environment ≈ 60–70%
VCs are now prioritizing profitability and capital efficiency over rapid growth. Founders face major inflection points when runway is limited, valuations are down, and terms become more investor-favorable—forcing decisions around layoffs, pivots, or alternative financing (e.g. venture debt, strategic investors).
Q1 VC activity is at six-year lows, and new fund formation is significantly depressed. Many mid-stage startups are struggling to close rounds amidst the downturn (SaaS Capital, Financial Times, RMI, upsilonit.com, Business Insider, Bloomberg)
A PitchBook survey via PYMNTS reports just 38% of investors expect more VC funding ahead—down from 58% six months prior (PYMNTS.com)
2. Navigating AI-Driven Business Model Obsolescence ≈ 50–60%
AI is disrupting traditional SaaS and services models. Boards and CEOs must assess whether their core offerings remain defensible—or risk becoming irrelevant. Incorporating AI isn’t optional anymore; it’s existential.
Q1 2025 VC capital leans heavily on AI, with ~74% of US VC deal dollars going to AI companies (SaaS Capital, Rothschild & Co., Medium)
Companies outside AI are feeling squeezed, creating urgency to pivot or reevaluate business models.
3. Burn vs. Breakeven Decisions ≈ 70–80%
With capital scarce and expensive, early-stage companies often face a strategic fork: continue burning to grow (hoping for favorable future funding) or switch to a breakeven mindset, sacrificing growth to survive longer.
Only 37% of equity-backed B2B SaaS firms are at breakeven or profitable; thus, over 60% are burning cash (upsilonit.com, Adam Fard UX Studio, SaaS Capital+
Research also shows high-burn yet innovative companies are slower to reach breakeven (Tech Startups, SpringerLink, Adam Fard UX Studio)
4. Talent Retention & Organizational Morale ≈ 50%
Layoffs, reduced compensation upside (e.g., due to flat/down rounds), and general market anxiety have made it harder to keep top talent engaged. This is especially acute when startup equity loses perceived value.
While there’s less hard data here, business sentiment around tightening funding, frequent pivots, and remote-work burnout suggest around half of companies struggle with morale and retention.
5. Go-to-Market Recalibration ≈ 60%
In uncertain economies, enterprise and SMB buyers alike are cutting or delaying tech spend. GTM strategies must be rethought—shorter sales cycles, faster ROI, land-and-expand motions, and customer success as a revenue engine become essential.
PitchBook notes a bifurcated market—top players attract major capital, while the majority scramble to recalibrate strategy (rightsidecapital.com, PYMNTS.com)
6. Pivoting or Refocusing the Product Roadmap ≈ 65–75%
AI trends and market feedback may demand fast product redefinition or repositioning. The decision to pivot or double down on core features can reshape the future—positively or catastrophically. The strategic environment suggests a majority are modifying roadmaps.
A report by Winsavvy found that 70% of startups that made a major pivot saw growth within 12 months, indicating that pivots are both common and effective (Proxycurl, WinSavvy, Medium)
7. Managing Investor Expectations and Governance Pressure ≈ 55–65%
Boards are increasingly assertive, pushing founders to hit efficiency benchmarks or explore M&A. Misalignment on strategy or culture can lead to leadership changes, founder dilution, or internal power struggles.
52% of smaller GPs and 68% of larger GPs identified “managing investor expectations and reporting requirements” as a top concern among private equity/general partners (MSCI)
Founders are facing “mounting pressure to demonstrate a clear path to profitability and capital efficiency” because growth alone no longer satisfies investor expectations (govclab.com, businessinsider.com, slush.org)
8. Strategic M&A: Buy, Sell, or Merge ≈ 50%
Some startups may face pressure to sell or merge for survival or scale. Others may be opportunistic acquirers. Either way, M&A represents a major inflection point demanding strong strategic clarity and negotiation skill.
EY-Parthenon notes that while deal volumes are expected to remain flat in 2025, activity has stayed elevated—23% above 2018–19 averages—with regulatory uncertainty (tariffs, antitrust) prompting tactical shifts toward M&A (The Economic Times, EY, PRovoke Media)
PwC also found that 30% of companies paused or revisited deals due to tariff and policy uncertainty—demonstrating how governance and macro pressure are influencing M&A strategies (EY, PwC, BCG Global)
9. Adapting to Policy & Regulatory Uncertainty (Especially in AI & Data) ≥ 60%
Rapid changes in data privacy, AI regulation, and federal tech oversight (e.g., around algorithmic bias, copyright, or use of public datasets) can materially impact go-to-market strategy, product design, and investor confidence.
New AI regulation is emerging globally, with many businesses in AI, data, or tech having to revise compliance practices—impacting the majority of AI-capital-intensive startups (Financial Times, practiceguides.chambers.com, SaaS Capital)
10. Repositioning for a Recessionary or Post-Recession Market ≈ 55–65%
With the U.S. economy giving mixed signals, startups must hedge for multiple scenarios—tightening spend if a recession looms, while also preparing to scale rapidly if growth returns. Misjudging the macro environment can waste capital or leave companies flat-footed.
Most VCs anticipate at best modest growth; concern over tariffs and macro issues has prompted many companies to reorient strategy in preparation for tougher conditions (rightsidecapital.com)
Actions To Take
Whatever winds may represent critical inflection points for your business, management teams and boards that move quickly to assess the current state and execute plans to correct the path forward have a higher probability of winning and producing desired returns on investment. But it also takes a systematic approach and decisiveness to assess, reengineer, and execute to get companies on a winning trajectory.
An approach we have used effectively across several companies facing multiple inflections points is as follows:
Define very specific Best-Case, Worst-Case and Conservative-Case Business Plans.
Define very specific KPIs for each functional area of the business.
Move forward on the Conservative Case path and monitor KPIs monthly.
At the earliest indication that KPIs are not tracking to targets, revert to the Worst-Case scenario.
If KPIs are tracking to exceed targets, move deliberately to the Best-Case scenario and continue to monitor KPIs and tweak the plan accordingly.
When companies act decisively they can track with the winds, using them to propel the course forward and so, turning inflection points into breakthroughs.
(Note: % of businesses impacted by each trend are estimated based upon a variety of sources but are not definitive.)
Ken Marshall, Managing Partner