5 Founders Explain How to Raise Money During a Financial Crisis
As VCs triage their existing portfolio companies—how do you navigate trying to fundraise?
Like many of you, we’ve had to reorient our fundraising strategies as the current crisis has unfolded. Many of my portfolio companies have also asked for advice because they’ve never seen a crisis like this before. Over the years, I’ve found that the fastest way to get answers is to talk to people who’ve navigated similar circumstances to understand what to expect and get easy-to-take-action tips to inform our new strategy.
I spoke with dozens of my most trusted advisors, people who survived and thrived — or crashed and burned — during 2001 and 2008 and have stories to tell. This article contains some of the best tips from those conversations.
Before we get into that, you are probably asking yourself, how long and deep will this “slump” be? There is no easy or accurate answer. The best piece I found is from Tomasz Tunguz. Here is a graph from his piece showing the total amount invested per quarter during the last recession.
What he saw was investment dollars drop by 40% from $4.8 billion to $2.9 billion in two quarters; that amount then steadied and began to recover two years later. That said, the deal count “was business as usual across the early fundraising rounds,” Tunguz writes. “Aside from Q3 2008, which saw a dip, VCs were still investing in as many rounds. Valuations and round sizes were the main contributing factor to the decline in VC dollars invested.”
Mark Suster wrote an excellent piece about this as well and is advising companies to weather an initial slump where VCs are focused on triage of existing portfolio companies for three to 18 months. Knowing that deals don’t disappear completely even when it slows down is key. So here are some tips for shifting your fundraising strategy.