Turbulent financial market, rising interest rates and an uncertain economic future are injecting a certain flavor of pessimism into the market that is shifting the power dynamic back in favor of investors. The boom of the last decade and especially the bubble of 2021 have all but faded, and that means startups looking for investment need to adjust their approach and unlearn what they learned during the bubble.
I’ve invested in over 250 companies and founded an all-in-one banking platform for startups and had a front row seat to what companies at various stages go through. I’ve noticed trends that point to old ways of fundraising becoming relevant again.
Below is a mix of best practices and advice I would give to anyone trying to raise money for their startup in this climate.
Don’t fundraise in the summer or winter
During COVID VCs started holding meetings from July to August and even in November and December. But that rarely happened before the pandemic. I can see that changing now. It’s best to use the extra time you have now to prepare a solid game plan that you can put into action when investors are around and engaged.
Ownership and management requirements will again matter more, so plan for this when listing investors to seek.
Prepare deck and data room
Capital has been plentiful for the past few years, which has encouraged a tendency to under-prepare for fundraising.
Shortcuts are no longer a good idea. Those preparing to pitch to investors should have their decks, data room, and projections strapped before they go to the meeting. This will allow VCs to do their due diligence and also show them that you are serious.
Get ready to show more progress
Regardless of the stage of your company, there is an expectation that you will make more progress than in recent years, so prepare to defend your progress. At the preload stage, you must have a prototype. In startups, you need to show revenue, and with Series A, you probably need to have evidence to show product-market fit.