With COVID-19 making a global impact on industries across the board, times have been tough for businesses having to also reduce budgets and work on sustaining themselves rather than focusing on growth. Especially for startups who rely on venture capital to get up and running, firms have cut back on investments as a way of conserving their own business against the impacts of the virus.
With the uncertainty of how COVID-19 is impacting VC investment and the unknown longevity of the current crisis, startups are now looking for new ways to attract firms and investors for early-stage capital and investments.
How Can Startups Get VC Amidst COVID-19
In the United States alone, the VC investment landscape in Q1 had shown a decrease of 44% in deals as an impact of the pandemic; despite this, it does not mean negotiations have stopped taking place between firms and startups to date. Undoubtedly this is a large percent of capital that investment firms have to deal with, but for startups, this time is still full of opportunities. Overall, these first-stage companies need to learn how to adjust their strategy to be perceived as a business worth investing in amid COVID-19.
As well as knowing opportunities are still at reach, it’s important for startups to understand the fluctuation in data on the check sizes given out by investors from Q1 to Q2. For example, artificial intelligence industries in Q1 had shown a $1 million increase from 2019’s data, yet in Q2 check sizes, investment budgets seemed to vastly shrink in size.
On the other hand, healthcare startups had the opposite effect showing a decrease in investment in Q1 followed by an 18% increase since 2019’s recorded data. From this, startups can start to see trends as to which type of companies investors are attracted to as time goes on; keeping in mind investor trends towards remote work, remote health, eCommerce, automation, and data privacy is likely to rise as the pandemic lingers. For cheaper startups, these businesses are also becoming more of interest to investors as they will allow firms to invest at low risk, as opposed to a larger startup that would potentially need a hefty money exchange.
Companies unquestionably need to understand: how can startups get VC amidst COVID-19 to help themselves sustain and grow even after the virus has passed.
9 Tips On How to Raise VC Amid COVID-19
Startups will need to take into account the following actions towards reaching business goals during COVID-19. During these times, strategies should be fine-tuned to create the best results for startup companies including your own.
1. Clear Message
Your startup should have a clear message and purpose in place in order to have a great pitch for potential investors and firms. Without clarity, firms may question what the exact direction of your startup is, as well as bringing up uncertainties as to whether your brand is worth doing work with or not. By clearly stating the reasoning behind your startup, it will help give investors a full understanding of why they should fund you. It may also be smart for your business to look for guidance in shaping your social media brand voice for clarity purposes, as well.
2. Solid Foundation
Even as a start-up, it’s important for your company to have a solid foundation before reaching out to any venture capital firm. Investors want to see a solid start to your business and have confidence backing it moving forward. Maturing your startup before pitching it, will ultimately increase the chances of a firm picking up your business in comparison to trying to attain a pre-seed investment.
When pitching your startup to an angel investor, also ask for specific people within their network that may be interested in your business. Asking a firm vaguely if they know anyone that may be interested in your company is less likely to get your startup in contact with investors as compared to asking for one specific person. Your startup being able to target one specific lead that is highly interested in your industry will potentially give you better results in comparison to a long list of somewhat attracted investors.
4. Lower Your Asking
It’s common with COVID-19’s impact on VC that firms are looking to spend less money on startups or seek out business opportunities with lower asking budgets. Take this into account with your own startup and be wise about what you and your team are asking for. For example, even if your business in total needs funding for $500,000 asking for finances in increments will raise your chances of creating a deal as opposed to asking for the budget in full, upfront.
5. Strong Proposal
Pitching a strong proposal with fact-based information is a great method to solidify the need for funding. Your startup should be researching trends relatable to your own industry as a way to show the positive effects as to why your company would be a smart choice to invest in. Laying this all out for investors will strengthen your pitch, as well as increase your likelihood of closing a deal.
6. Find Connections
While performing research on who your startup company should pitch to, look for firms that have invested in a similar business to your own. Looking for mutual connections or networking opportunities in VC can potentially create a “warm” introduction to your pitching strategy.
7. Don’t Get Discouraged
Don’t get discouraged if your startup has not heard back from any investors. With startups, it’s common to persistently reach out to firms and contacts even if there is no initial response. A large mistake many companies have made is giving up too easily on a firm; no answer does not mean they aren’t willing to invest, so make sure to keep reaching out as there is still hope in a potential deal.
8. Stay in Contact
Even if an investor initially turns down your startup, asking them to stay in touch or if they are willing to sign up for your newsletter can potentially change their mind in the future. Updating firms on your recent startup success couldn’t hurt and essentially has no negative repercussions.
9. Increase Pitching
The more your startup pitches to different investors, the more likely you’ll find success. Especially during COVID-19, excessive pitching will be crucial to meet your startup’s budget goal. Before COVID-19, your business may have been pitching to 50 firms, don’t be discouraged if your startup now needs to pitch to 100 or more investors to get a response.
Reiterating the importance of weaving these methods into your own startup plan, businesses need to stay encouraged and on top of their strategy, working continuously at improving it.
How COVID-19 is impacting VC investment also relates to other industries around the world. A multitude if not all businesses have been hit hard and are now having to learn new strategies as the pandemic continues.
Startups can take away this knowledge of the importance of creating fresh approaches that help their business stand out against competitors, as well as mastering the art of negotiation to help themselves reach intended goals. In conclusion, startups need to remember that VC investments are still actively seeking out deals and that there is still hope for success with one’s own business.
This blog post is written by Hannah O’Brien, she is a passionate content writer with an interest in digital marketing, social media, and copywriting. She writes for digital marketing agency Aumcore, which specializes in generating the prime digital experience paired with a top-notch content marketing plan.