It is no small statement to say that the world economy has shifted drastically due to the Covid-19 response. From widespread closures to disruptions to trade systems, the pandemic has created seismic interruptions to our way of living, affecting various sectors of industry that are interconnected and, ultimately, has led to consequences in the realm of venture capital. As such, new companies must be cognizant of the impact Corona virus has had and should make adjustments as a result.
Take some time to gain insight into the challenges angel investors are facing right now. It is often the case that they are taking stock of the portfolios they have already acquired and are examining them for their long-term viability. As this process unfolds, many are not taking on new projects. Those who are doing so are more risk averse than formerly, and the way to meet these increasingly more stringent criteria is to hone in on sustainable revenue streams.
More than ever, investment partners want to work with businesses whose bottom line is secure and who have done their part to ensure continued revenue. Demonstrating your commitment to your client base and a solid ability to deliver products or services to meet demand is the most important thing you can do to convey stability. In addition, startups and angel investors alike are tending to connect with those whom they already know rather than branching out and forging new relationships.
Carefully Calculate Your Needs
It’s understandably frustrating to have to plan for your short-term needs as well as those for projected growth under normal circumstances. The nature of today’s financial environment, however, is that infusions of cash are going to take longer to process, and therefore your immediate necessities may overshadow future objectives while you wait.
Consider the amount it will take to get you through your initial phases of operation so that you do not run out of money. The harsh truth is that you may have to postpone scaling until you can be sure your overhead is met in the meantime. It may also be necessary to obtain a bridge round to raise cash resources, particularly if your income experiences a dip or if you have a temporary reduction in your customer base.
Lower Your Price
Competition is intense between young companies who are vying for attention from financial institutions and investors. You need to make your pitch as appealing as possible, and one way to do this is to manage your finances in such a way that you can ask for less than you would have normally done. Also take into account the fact that the bull market is in decline for startups – an abrupt turnaround from the soaring valuations of the last few years.
Be sure to have a detailed plan in place for how your firm intends to handle the Covid-19 situation, and be prepared to talk about this. Lead with flexibility in terms of timeframes and expectations, and look for ways your industry may be poised to benefit from the crisis. As a startup, you actually have distinct advantages for weathering calamities of this kind, as you will be more agile and able to adjust to fluctuations in the market. Communicate these angles to further position your company for success in obtaining investor dollars.
Fidelman and Co. help new businesses create superior presentation materials on their path to achieving their goals in partnering with venture capital investors and scaling their models. We provide oversight in various ways, including the creation of management strategies and in financial consulting. We look forward to working with you and invite you to reach out to us with any questions you may have.