Startup fundraising is no different to being affected by the COVID-19 Pandemic and its effects.
To begin with the good, there has been plenty of opportunity available, which many entrepreneurs have taken advantage of. In such situations, fast-moving, adaptable young enterprises that can generate quick answers faster than the establishment are perfect. It's true that necessity is the mother of invention.
As Czech investor Ondrej Bartos, speaking to TechCrunch, said:
“There is a lot of opportunity for good tech startups. Technology is what’s helping people and countries to get out of crises faster with less damage. Our advice to startups is still the same: focus on your cause and try to solve problems in your space better than anybody else.”
The crisis has also played into the hands of some startups more established in certain industries. We’ve seen companies in
take advantage of some of the work and lifestyle changes that have gone hand-in-hand with lockdowns around the world. Startups in these industries have seen a boost whilst at the same time others may have taken a turn for the worse.
Covid-19 has thrown the economy into disarray, and entrepreneurs are not immune to the consequences. Most investors have adapted to maintain current portfolios, while some have done the exact opposite, diving headfirst into the pandemic's unexplored prospects. There are no hard and fast laws that govern investor behaviour, but there are some guiding clues startups can leverage to maintain or even grow capital through an economic depression
Venture investors are still interested in early-stage investments, with the possibility of a multi-year collaboration. However, these deals may be slower to execute, so founders should be prepared for a more competitive market.
Setting realistic goals is also crucial to weathering the storm. In general, entrepreneurs should modify their forecasts to account for a 25% to 90% decline in top-line growth depending on the industry. This quantity changes according to the startup's industry and current growth during the epidemic, but setting targets based on the present situation will assist the company in the long run.
While the year 2020 threw many firms' expansion plans into disarray, there is still plenty of opportunity on the horizon. Startups may take advantage of this unique opportunity to position themselves for years to come by remaining adaptable and responding to shifting market demands.
The 5 Ps - Proper Planning Prevents Poor Performance
A few pointer to be mindful of while moving your presentations and pitch decks online to present to investors.
By emailing the presentation to all meeting participants, you can avoid any potential technical issues (such as a screen sharing failure). It allows the investor to request any information that is missing (and for you to have a ready answer if this question pops up).
Make sure your surroundings (as well as your background) are professional. Check your internet connection, as well as your audio and video capabilities.
Be honest about what you know and what you do not know. Demonstrate that you understand market dynamics by explaining the first and second-order effects of Coronavirus on your company. Give examples of important decisions you made to assist your business to adapt to the present environment.
As you're presenting, give the investor the option to control the pace.
Do they want to hear the entire pitch before asking questions? Or would they prefer to leave comments as you go? Obtaining input is quite beneficial. Always follow up – attempt to build a long-term relationship based on trust. And, if at all possible, provide value — it may be as simple as writing a catchy introduction.
Even at the best of times, entrepreneurship is akin to completing an obstacle course, with failures and hurdles. Are you able to turn some of the difficulties into opportunities? Using them as growth accelerators will distinguish you as an entrepreneur and demonstrate your tenacity to investors.
Understanding that investor sentiments are complex opens up a huge opportunity for companies. Covid-19 is only one reason that may deter investment, but two other powerful elements may have the opposite effect. One example is the acceleration of digitalisation, which has favoured technology companies in their pursuit of startup capital and expansion. In industries such as healthcare and education, should make a move in the digital world.
While there are accessible resources to help prepare for a successful pitch in general, pitching for survival during a pandemic has its own set of challenges and questions that some founders may not be anticipating.
NEXEA's Managing Partner, Ben Lim, provides an assessment of the health of the startup space and from the perspective of an angel investor, how has startup fundraising been any different in the pandemic era.
A lot of startups out there not doing well, a lot of early money for them is less accessible. Their main sources of early-stage money are bootstrapping and from friends. Because of the pandemic affecting businesses nationally, it has in return affected the family and friends funds amount as well.
Startups find it harder to raise funds during these times. As an investor, its business as usual mostly, not entirely. A lot of things moved online, the digitization process as a corporate community has accelerated, which is a good thing to cope and come out of the crisis. As an investor, it does help a certain segment and not for the other. For instance startups in tourism will certainly not be doing well in these times.Ben Lim, Managing Partner at NEXEA
In a post pandemic or COVID world, startups focusing on artificial intelligence, digitisation alongside their nature being fast-growing and scalable. During lockdowns, it becomes increasingly harder for new startups to approach, network and connect face-to-face with venture capitals and angel investors. Ben Lim, provides his insights on how this can be improved
Try and build a relationship with angels and VCs. There are a few ways to do it. Keep up regular updates after the first meet with the angel investor and VCs. Be proactive and understand that the relationship between the startup founder and the investor is supposed to be for the long term. secondly, for virtual calls, please leave the video on as that face-to-face interaction is quite important
Money is available, yet the situation remains difficult. Fundraising is now more vital than it has ever been, especially for seed and early-stage companies.
The impacts of COVID-19 will continue to have ripple effects for years, making it important for founders to remain nimble. According to JPMorgan Chase’s recent Business Leaders Outlook Pulse Survey, more than half of business leaders have shifted or plan to shift their operating models to be more online, in response to pandemic-related closures and shifting consumer demands. Startups that implement adaptable strategies will continue to see the most success.