When the U.S. went into Covid-19 lockdown early final 12 months, it was nonetheless unclear what impact such a large-scale international disaster would have on startups and VC. Nevertheless, almost a 12 months in, we have seen that the uncertainty created by the pandemic does not must utterly throw your funding targets astray. The truth is, in response to a latest report, U.S.-based startups raised an estimated $36.5 billion in funding in Q3 2020, regardless of fewer complete offers.
Although the funding course of for many of 2020 appeared utterly totally different from a long time previous, offers are nonetheless getting achieved. By leaning into new methods to point out worth, savvy startups can show their resilience to buyers and shut funding rounds, even when assembly with buyers face-to-face will not be an possibility.
How you can Make New Funding Processes Work to Your Benefit
What can founders do to land funding in the course of the pandemic? Listed below are three techniques I’ve seen work effectively to date and the way startups can apply them to take advantage of the deal-making course of transferring ahead.
1. Rise to the (digital) event to depart an enduring impression.
Whereas connecting with the appropriate VC is without doubt one of the greatest hurdles to beat, making your organization shine when you do not benefit from exhibiting it off in-person is equally essential. Since buyers cannot stroll the halls of your organization to see your groups in motion, observe your workplace tradition, or have interaction in spontaneous dialog with staff, it’s important to create an enticing view into your enterprise past a typical presentation.
Discover a approach to push previous the obstacles of Zoom and supply an correct, compelling image of what units you aside. Visuals and multimedia, for instance, give buyers one thing to attach with. Assume buyer and worker testimonial movies, interactive demos, or photographs, all of which may help you break by way of the display and seize consideration.
In working with Orchard (a Revolution Progress portfolio firm remodeling the best way individuals purchase properties) on their newest funding spherical, we had been extremely impressed by the thought and proactivity that went into their assist of the due diligence course of. We weren’t capable of meet with the workforce in-person earlier than the pandemic hit, and for the primary time needed to depend on digital conferences and property to judge whether or not we had been a match.
One of many techniques that stood out probably the most, past Orchard’s presentation, was the standard of knowledge of their digital knowledge room, which anticipated each query an investor would possibly ask and guided us by way of due diligence seamlessly. Information rooms, particularly in the course of the pandemic, can and will act as an FAQ for what issues most to buyers. The perfect knowledge rooms concurrently present “within the weeds” particulars the place wanted whereas nonetheless speaking the larger image on long-term alternative, primarily offering buyers with the solutions to the take a look at.
Think about opening up your prolonged workforce’s time as a lot as potential as effectively throughout fundraising. Orchard related us with its full management bench (heads of gross sales, finance, operations, product, know-how, authorized & compliance, and so forth.), in addition to their boots-on-the-ground brokers in locations like Austin and Atlanta, who had been capable of paint the broader image of Orchard’s enterprise and tradition. Offering VCs (on the proper stage of engagement) with entry to staff and third-party advocates has all the time performed an essential function in serving to construct a connection between firm and investor, and particularly helped us full our diligence in a purely distant surroundings.
2. Be clear on the influence of COVID on your enterprise (each what and what you do not).
Though many corporations skilled an comprehensible “fog of battle” second, inflicting them to momentarily lose their bearings early within the pandemic, we’re too far alongside within the disaster to not have a robust reply on the way it has modified your enterprise. Regardless of the general public market reaching all-time highs not too long ago — with some companies buoyed by latest occasions such because the election and vacation buying — buyers are already wanting previous these peaks to investigate what the enterprise outlook can be as soon as the mud settles.
Have clear and concise responses prepared that talk to a number of key areas: how Covid-19 affected your enterprise; the measures your organization has taken since to pivot and maintain development; what elements or occasions have impacted your spikes; and the way you are allocating time, consideration and cash for the long run vs. short-term adjustments. Whereas solutions should be crisp on how latest occasions altered operations and technique, I’ve discovered it most useful when entrepreneurs are humble and mature sufficient to additionally clearly articulate what they do not know in regards to the months and years to come back. Nobody has full certainty on the lasting results of Covid-19, however good operators and stewards of capital come to the fundraise course of ready with situations and danger tradeoffs recognized for the recognized unknowns.
Past the enterprise impacts, VCs can even take note of how CEOs and their direct management groups stepped as much as steer the ship, and the way they plan to proceed doing so in 2021. VCs are all the time seeking to assess a founder/CEO’s resiliency, and for lots of the companies we have now met not too long ago, there has by no means been a larger case examine of coping with adversity than 2020. Studying how leaders handled the totally different phases of navigating this pandemic, initially surviving and hopefully now thriving, has been a serious diligence merchandise for us throughout these unprecedented instances. How firm leaders protected staff and clients, how they preserved investor capital and enterprise liquidity, how they interacted with Board members and advisors, and what they’ve discovered from all of it are elements an entrepreneur needs to be ready to talk to in funding interviews.
3. Use the momentary slowdown to develop your community.
Getting observed by buyers generally is a problem and with out networking alternatives, chilly outreach could also be your solely possibility. The excellent news is that with out hectic journey schedules and calendars booked with in-person conferences, many buyers have extra time lately to think about chilly inbounds. So it is a good suggestion to “take the shot” and attain out. With conversations happening on Zoom somewhat than over lunch, contemplate approaching buyers past your geographic middle of gravity. Partnering with entrepreneurs outdoors of Silicon Valley has lengthy been part of our funding thesis and we’re glad to see that the pandemic has spurred different VCs to look outdoors of the coastal tech hubs the place they’re based mostly to jot down their subsequent verify.
Going past the usual intro observe and digging into your connections can even assist make your outreach extra related. Connecting the dots between you and somebody the investor already is aware of or trusts — whether or not it is a totally different investor who could have pointed you to them, a lead with a CEO they’re conversant in, or a partnership with one other firm of their portfolio — can enhance your possibilities of receiving a response. Nevertheless, if you do not have these relationships to name on, do not be dissuaded in your chilly outreach. Buyers could also be simply as impressed together with your boldness and tenacity.
Lastly, keep in mind that even when the timing will not be proper as we speak, the potential for reconnecting with the identical buyers down the road is not out of the query. Do not lose sight of the long-term when interacting together with your community and know that if a chance does not pan out now, these relationships are nonetheless priceless to keep up for the long run.
The adjustments introduced on by the pandemic do not must imply that your visions for funding should be placed on maintain. If founders are open to studying totally different steps to a brand new dance, they will make the method work to their benefit. Whereas these adjustments might not be right here to remain without end, making use of the ability of your community, and enabling a compelling and clear digital diligence course of can show fruitful for founders in search of funding within the 12 months forward.