A tumultuous financial market, rising interest rates and an uncertain economic future all create a certain pessimism in the market that shifts the power dynamics in favor of investors. The boom of the past decade, and especially the bubble of 2021, has all but disappeared, meaning startups looking to invest must adapt their approach and unlearn what they learned during the bubble.
I’ve invested in over 250 companies and created an all-in-one banking platform for startups, and I’ve been front-row seat of what companies go through at different stages. I’ve noticed trends indicating that the old ways of fundraising are 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.
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Don’t collect money in the summer or winter
During COVID, VCs started holding meetings from July to August and even November and December. But that was rarely the case before the pandemic. I see that changing now. It’s best to use the extra time you have now to put together a solid game plan that you can set in motion when investors are around and involved.
Ownership and governance requirements will again matter, so plan it when you list investors to pursue.
Have a deck and data room ready
Capital has been in abundance in recent years, creating a tendency to under-prepare for fundraising.
Shortcuts are no longer a good idea. Those preparing to approach investors should have a deck, data room, and projections buttoned up before going to the meeting. This allows VCs to do their due diligence and also shows that you are serious.
Prepare to show more progress
Regardless of the stage of your business, you are expected to have made more progress than in years past, so prepare to defend your progress. In the pre-seed phase you should have a prototype. In the beginning you should show sales, and with Serie A you should probably have evidence to demonstrate product-market fit.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.