Raising capital in the pandemic

Raising capital in the pandemic

It has officially been more than a year since the COVID-19 madness entrapped the whole world and pulled the handbrake on our lives. A great number of people are losing their jobs, and are forced to either adapt to the situation or close down for good.

Regardless of the harsh environment, the activity of venture-capital funds was only 6% less in the first half of 2020, than in the same period of 2019, which might be a good sign that the start-up activity is more resilient than we thought.

Due to companies laying off their staff in a crisis, those people might finally start building their own company, and there are a lot of examples for that: Mailchimp in 2001 recession, Uber, Airbnb and Slacked launched in the 2008 recession.

If you are a start-up looking how to raise funds and grow in the middle of a pandemic, here are a few golden tips:

• The right time – Entrepreneurs need to assess if this is the right time for them to raise capital. Times are uncertain, investors are cautious more than ever and the playground has changed. Before COVID-19, most start-ups could raise the initial seed capital based on just an idea and the pitch deck. Nowadays, you should see clearly how your product looks like, what are strengths and weaknesses of it and how do you plan to brand yourself. Think of ways how you can get to that minimum viable product, be it a bank loan, family and friends, but make it presentable for investors.

• Virtual pitch – Due to COVID-19, we had to say goodbye to elevator pitches, meetings over coffee and in conference rooms. Everything has shifted to virtual calls, over Zoom, Teams or the next one and that is the current reality we have to adapt if we plan to raise the much-needed capital. Do not make the sessions into a 1h boring presentation without conversation: send your pitch materials beforehand to potential investors and have a constructive discussion over the call. Also, invest in proper audio and video equipment when doing important video calls – no one likes to see grainy visual or erratic sound coming from their headphones or computers.

• Adapt, adapt, adapt – Your company was designed and founded to function properly in one climate, but that has changed and you need to adapt to the new situation and that can be overwhelming. If you were in the middle of capital raising when the pandemic took full swing, the only logical thing is to prepare a strategy on how will your company tackle the pandemic and the ensuing economic downturn.

Whenever a crisis happens, companies are put on a test, where the old system of doing things is challenged. It is a time of re-evaluation where business models can be changed and positive changes accelerated.

Sources:

• https://www.entrepreneur.com/article/360376
• https://www.forbes.com/sites/kylewestaway/2020/11/02/how-to-raise-capital-during-covid-19-advice-from-vcs-and-entrepreneurs-who-have-raised-over-300-million-in-the-pandemic/?sh=736454db5cb4