A tumultuous financial market, rising interest rates and an uncertain economic future are all infusing a certain flavor of pessimism into the market that is shifting the power dynamic back in favor of investors. The boom of the past decade, and especially the bubble of 2021, has pretty much faded away, and that means startups looking for investment need to adjust their approach and unlearn what they learned during the bubble.
I’ve invested in over 250 companies and founded an all-in-one banking platform for startups, and I’ve had a front-row seat to what companies at various stages are going through. I’ve noticed trends that point toward the old ways of fundraising 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.
Don’t fundraise in the summer or winter
During COVID, VCs started taking meetings from July to August and even in November and December. But that was rarely the case before the pandemic. I’m seeing that changing now. It’s best to use the extra time you have now to prepare a solid game plan that you can set into motion when investors are around and engaged.
Ownership and governance requirements will matter more again, so plan for it when you’re listing investors to pursue.
Have a deck and data room ready
Capital has been abundant in the past few years, which fostered a tendency to underprepare for fundraising.
Shortcuts are no longer a good idea. Those preparing to approach investors should have a deck, a data room and projections buttoned up before going into the meeting. This will let VCs do their due diligence and also show them that you’re serious.
Prepare to show more progress
No matter the stage of your company, there is the expectation that you’ll have made more progress than in recent years, so prepare to defend your progress. At the pre-seed stage, you should have a prototype. At seed, you should show revenue, and at Series A, you should probably have evidence to show product-market fit.