Written By: Marc Halpin
Looking back at 22 years of building and supporting startups I sometimes wonder if we, as Founders, are all completely nuts!
Let’s face it, it’s never easy! Let’s say you started a company in 2019 or 2020. In your first year or so a global pandemic hit. Yep, a GLOBAL PANDEMIC. You think, “Ok, I can handle this” and you say to yourself, “at least the fundraising environment is great.” Then, we hit 2022: the pandemic is still kicking around and now you’ve got emails in your inbox and articles in WSJ citing a massive slowdown in venture capital deployment. Are you kidding me? The hits keep on coming!
In 2021, $330B of U.S. venture capital was deployed making it the best year ever in the 50-year history of the VC Industry.
2022 brings a massive slowdown in deployment. Valuations drop and access to capital becomes significantly restricted.
Let me tell you something, in real terms, 2021 wasn’t as great as the headlines represent and 2022 isn’t going to be as bad as the headlines represent either. Bad companies weren’t funded in 2021 and good companies ARE going to be funded in 2022.
That said, as someone who was raising capital in 2008 and 2011, here’s 10 things you should do if you’re raising seed capital ($2-$10M) now.
- Assume it’s going to take you longer than you think – 6 months minimum (and that’s if you’ve really got your act together).
- Be prepared to engage with at least 40-50 qualified VC’s that deploy seed stage capital and focus on your vertical.
- Really think about your go-to-market in the context of the macro environment. Build an insightful (low cost) plan to acquire customers. SEM is not it, I promise you!
- NEVER price your own deal. A VC asks you “What’s your valuation target?” You respond “I’m letting the market decide. I’m focused on finding a great partner, not price.”
- Think about what in your business model works in a recessionary environment and make that part of your pitch. Every business has something in this area, find it and work it.
- No investor is ‘in’ until their money is wired. Don’t count on a verbal commitment. The act of writing a check tests your mettle in this environment.
- Don’t take your foot off the ‘revenue gas’ through fundraising. Momentum is everything.
- Change your investment and hiring plan from what it was six months ago. Make sure you’re aiming to do more with less and demonstrate that.
- Raise enough cash for 24 months of operational runway – don’t plan to raise in 2023.
- Don’t get too hung up on valuation. Focus more on a great VC partner with ‘dry powder’ who has a reputation for staying with a portco through the lifetime of the business.
As a final consideration, even if (and it’s a big if) the venture world gets ‘frothy’ again in the next 6 months, don’t change a thing. Points 1-10 still stand.
Kerosene Ventures – Helping Great Founders Raise Capital