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It’s been a haul of a year for startups on the search for capital from VCs and other funding sources. Even without a global recession, fewer than half of seed-funded companies receive Series A funding. And with 68% of investors believing the pandemic would have a negative impact on early-stage investments, many business leaders expected that number to fall even further.
But investors have continued to engage with startups in spite of early predictions about COVID-19, with some industries seeing even more investment due to the pandemic. Funding cycles and investment rounds continue to look much like they did before: When VCs find the right match, they invest. But they’re taking more time to make decisions. In the age of remote operations and virtual pitching, pitch teams need to do more to build trust, provide context, and create excitement around their businesses.
My company secured Series A funding in August for our cyber security fusion platform after starting the drive in late Q1. Though raising capital was always in our roadmap for early 2020, the process took a little longer, pushing back our timeline. As VCs are expected to do more due diligence and provide more data and financials to their leadership, founders must anticipate a more drawn-out process. But it also provides an opportunity to develop the needed strategy, forecasting, and execution plan.
Advice for founders looking for funds
You can’t begin the fundraising process just a few months before you hope to secure funding. It has to be an ongoing process that incorporates constant adjustments to better align with your mission statement. A winning pitch requires you to optimize all components of your presentation and set yourself up for success long before the pitch.
If your company plans to secure investments during the COVID-19 environment, here are a few pieces of advice to keep your efforts on track:
Meet investors early and often
Too many founders make the mistake of approaching investors only when they’re ready to pitch. When you come armed with a deck to your first meeting with a VC who isn’t familiar with your company, it is difficult for them to understand the growth of your business over time. Develop a constant-touch relationship with prospective investors, allowing them to understand your business over time so when you are ready to pitch, VCs know your progress and see that you’ve remained resilient during the pandemic.
Go with the times
It’s important to be patient when selecting VCs and adapt to the funds that are open. Set up meetings with additional prospects to compensate for VCs who won’t have active funds when you’re ready to secure funding—a practice that is even more important during this period of increased market volatility. For example, maybe you have 250 VCs in mind, but 10 of them aren’t investing due to internal processes. Create a list of backups—but still meet with the 10 inactive VCs to set the stage for future rounds of funding.
Know what you want
Are you looking for a partner for your business or simply a transactional relationship? Do your research and ensure the organizations you’re talking to align with your values and expectations. For example, if you’re looking for a partner, you need to identify a VC that can introduce you to the right people to grow your team, or connect with other product companies to grow your partner network. Ultimately, you want a VC willing to understand your priorities so you can move forward in the same direction.
Be open to alternative funding sources
Non-VC investors are becoming more common. Companies like Google and others are carving out money for dedicated venture arms, providing value as partners as well as investors. For Cyware, going with an alternative funder for Series A made sense because it allowed us to partner with a team that has a deep understanding of cybersecurity and is globally recognized for the same. As some companies find growth opportunities and have more capital to actively invest, be sure to include a few major companies on your list of prospects.
Fill talent gaps
While founders should focus on the pitch and building relationships with investors, the process shouldn’t be a one-person show. It’s critical to have a supportive team to help create the pitch deck and build out supplemental materials. If you don’t have the internal expertise, recruit outside experts like graphic designers and coaches with experience in securing investments.
Stay true to your original idea
Your pitch shouldn’t dramatically change as a result of operational changes. If it has, you need to communicate the change to investors early on. Otherwise, they may be surprised when you appear at the pitch with a different product than you’ve promised them. Consider adding a slide or two at the end of your deck to talk about post-COVID-19 strategy and how you’re weathering the storm. VCs want to know how you adapted to the pandemic and you need to demonstrate you have a resilient business.
Come as you are
At the beginning of your career, it’s easy to get caught up in the idea that you need to wear a new pair of Jordans to a west coast pitch to keep pace with the VCs. But in the age of Zoom pitches set in home offices, investors expect you to come as you are. You don’t have to quickly change before a meeting—just be yourself.
After any funding round, there’s plenty to learn. The process never stops. Planning early and often is the most effective way to hit targets, achieve fundraising goals, and remain resilient during uncertain times.
Anuj Goel is cofounder and CEO of Cyware, a cyber fusion and threat intelligence automation provider. Prior to founding Cyware, Anuj served as the head of global cyber strategy and planning at Citigroup. Anuj was also an executive committee member of the Financial Services Sector Coordinating Council, served as a member of the U.S. Chamber of Commerce’s National Security Task Force, and has actively participated in information sharing initiatives.