Brex hosted a really great webinar on Fundraising in the current environment - here are my notes
Nowadays, the world has been flipped upside down. What worked pre-March doesn't stand a chance today. That goes for investors, business owners, parents, doctors. Everyone.
I signed up for this when the world was still 'normal'. Wow what a difference a few weeks makes. I decided it was definitely still worth my time to jump on the 'Brexfast in Bed: Startup Fundraising in Today’s Environment' webinar. I am glad I did since it resonated for me and I wanted to share with my clients (as well as anyone reading now!). A lot of it I agreed with and have been discussing the game plan with my clients over the last few weeks. Some of it was new to me and I will use the info going forward. The bottom line is that I wanted to spread the word and hopefully you will get at least 1 nugget out of it that will help your business. If you do, please pass it along to others that might be going through the same predicament.
If you have questions, let me know. Also, if you think Realm Startup Advisory is a fit let us know! Brex too! I can help with an intro to get started on their platform.
On to the (raw) notes:
Will professional investors still invest in this environment or after?
Early stage co is binary outcome - all about Team, TAM, and Tech - not Global GDP trajectory Late stage co is more impacted by this environment - Revs, traction, unit economics, cash burn are moving based on current economic situation Funding Rounds will be SLOWER Need to leverage EXISTING relationships - harder to replicate real relationship/fit via Zoom vs in real life (Definitely agree! I am telling clients that no new investors will write checks if you haven't been speaking to them already) Valuations should not be impacted significantly for early stage co (I disagree with this) Terms might be adjusted in terms of Governance (super-voting rights, Information rights, anti-dilution) less founder friendly Investor Decks are CRITICAL - be clear, concise and high quality due to not being able to meet in person, VCs will be much pickier *Put off raising a round now BUT be proactive and start reaching out to potential investors NOW (tell your story, disseminate info, show confidence in your business model) BUILD relationships now w potential investors - then come back in Q4 (I say this all the time - start weaving the narrative ASAP. No one writes a check after the first meeting) DON'T say 'Hey I need money now' to a new contact.
Instead, reach out to existing investors. Now is fine on same terms as previous round. Financial Models (commercial alert, Realm can help with this!) MUST show your profitability roadmap and unit economics must be stated - cost to deliver 1 unit or product or service HAVE to be thoughtful about expense forecasting (especially for early stage co) 'What are my expenses in the next X months' and what is the plan to get through this time period? Accurate Burn calculation is critical Late Stage co: Not a good time to raise - could be a sign of weakness These are bigger rounds, so now it will be more investors, more complicated Need to position fund-raise around a specific milestone Structure is important now: do a convert rather than equity now (along with Ratchets, anti-dilution more relevant) Dataroom - has to be tight, all materials in there, ready - TIME is VERY SHORT Financial Models NEED to show Recessionary environment now (I have always advocated for 2 scenarios: Bull and Bear (or Base) Cases. It shows that you are thoughtful and have a backup plan in case things don't go swimmingly)
Also go through how you have been impacted recently Communication: with ALL stakeholders (investors, customers, partners, suppliers) Revise OKRs for Q2 and beyond to reflect new world we live in Review headcount planning, expenses Implementing operational changes based on contingency planning You need to match your investors' paranoia (or level of concern) Human reflex is to be LESS transparent, withhold info - do the OPPOSITE and show them all the numbers, etc (I tell everyone I get on the phone...or Zoom that you must be in front of the narrative here. Don't hold back or ghost employees, investors, stakeholders. OVER-communicate! Q&A: Pay your bills! Build relationships and show that when times are tough, you are reliable Spending has been impacted on travel, ride share and dining negatively. Spending on ecomm has shown a lot of growth. Funding Process: Slowdown will occur at the beginning - # of people you reach out to needs to be larger, take more time Then once you are at/near term sheet that should not take long look into SBA loans if they are a fit for your biz - use to close a ST cashflow gap not a permanent solution Angels will be first to stop investing bc of stock market decline, full time job is not to invest in startups You should be cognizant of Marketing spend ROI - it will be impacted now and you should plan accordingly NEED warm intros now - cold outreach just not the way to go For contingency planning, think it will last a long time so prepare for LT When preparing for downside think it will be larger and longer Act fast for things that might be short term in duration, take more time to act for things that will have LT consequences (ie whether to lease a smaller office)
Finally, if you have made it this far, here are some slides that they had.