Written By: Kelly Bryant
There’s often 3 reactions people have to uncertainty: fight, flight or freeze.
When it comes to raising capital in a downturn, I see Founders embody these different response mechanisms daily. Some decide to freeze and stop raising altogether because ‘the market isn’t conducive to a raise’. Others choose to fight by pursuing their same fundraising strategy despite getting the perpetual ‘slow no’ from the many investors they’ve pitched. In any case, being RE-active to the market rather than PRO-active has put them at a disadvantage.
With that in mind, here’s 3 proactive ways to increase your likelihood of raising capital in a downturn.
- Keep Timing on Your Side
The best time to raise capital is when your business is growing. This is especially true during a recession when investors are more risk averse and likely won’t be comfortable investing in a pre-revenue startup or a startup that’s not growing significantly month-on-month. Think meaningfully about which quarter you’re anticipating the most growth and plan on that being the season when you’re connecting with investors. Yes – it will be a lot to sell and fundraise simultaneously – get ready to be busy and plan accordingly!
- Play the Volume Game
It’s highly unlikely the first investor you meet will be ‘the one’. Plan on meeting 3x the number of investors you had anticipated in order to close the round. This should still be a targeted group that is strategically aligned to make investments at your stage and within your vertical. You want to do what’s best for your company by having as many potential ‘buyers’ viewing your deal. Don’t feel you have a strong enough network to make that happen? I know a great team that can help make that can help – cough cough 🙂
- Be Recession Proof
Investors want to invest in painkillers not vitamins. It’s important the VC understands the major value prop you’re providing to your end user and the ‘stickiness’ behind your product. Make sure you’re purposefully utilizing the ‘Why Now’ slide in your deck to explain why your company will continue to operate successfully this year and beyond.
Let me be clear, I commend any Founder who chooses to raise capital no matter the state of the market. Whether there’s a recession looming near or we’re operating in a frothy market, fundraising is still an extremely difficult (albeit critical) process. Make sure you’re setting your company up for success and staying 10 steps ahead in 2023 with these initiatives.
Kerosene Ventures – Helping Great Founders Raise Capital