Vault Unlocked

Fundraising Post-COVID: Tactical Tips From An Early-Stage Investor

During our June Virtual Lunch, we were joined by Ankit Agarwal, founder of A7 Ventures, to discuss ways startup fundraising has changed amid COVID-19 and how founders can best position themselves for virtual conversations with investors. If you missed it, you can watch it below.

Video Recording: https://my.demio.com/recording/e32ZG6Ms 

Here’s a quick rundown of the discussion we had during this month’s virtual lunch:

Q: How has COVID-19 affected fundraising? 

A: When everything started happening in early March it was interesting to see how people were reacting. For the companies I was involved with, I saw one of three things happen during that time. 

  • Some companies were, as quickly as possible, able to close their rounds. 
  • Other companies took the complete opposite approach. Feeling they could survive on their own, they decided to wait it out by putting their fundraising on hold.
  • Several companies reduced the amount of money they were raising. For companies that were already 50-70% committed, they capped the round, took the money that was there, and moved on.  

These shifts in approach did allow for some good as a few deals that I was interested, which had originally been oversubscribed and had no room for me, suddenly had room in their round. 

Investor Liquidity Crisis

For independent angels who are invested in the public market share, they’re now trying to rebalance their portfolio, making sure they have the liquidity to continue to invest in companies. This is where the squeeze came in and a lot of angel investors dropped out of rounds in March- April because they didn’t have the liquidity or they were overleveraged somewhere else and needed to rebalance.

On the flip side, organized funds don’t have the exact problem but their challenge was that March- April wasn’t a good time to make capital calls to their LP (Limited Partnership) investors. As a fund manager, you don’t want to go to your LPs when there is so much uncertainty in the market and proceed to ask them for more money.

When Ankit started his previous company in 2008 he remembers the financial crisis and trying to raise angel money back then. It was the same problem; you’re going out, your company is ready to raise money but everyone else is in a crazy financial situation. At that point, it isn’t about your company anymore it’s about liquidity. 

Q: Should you try to start conversations with investors during the current environment? 

A: At the end of the day investors want to invest in awesome ideas and companies. So those that can invest are investing right now. Funds are there, it’s just a little more selective as to which companies are going to get the money at the end of the day. 

The process is just slightly different now. If you look back at pre-COVID days, entrepreneurs would meet an angel investor at a coffee shop or in their office but now that everything has gone virtual entrepreneurs will need to be more cognizant of that process. 

Tips For Virtual Pitching: 

  • If you’re going to be pitching anyone online, heavily emphasize that you want a video call. You want to take any possible advantage for building that comradery and long term relationship with a potential investor. 
  • Make sure you have a good stable camera along with the right angles to set yourself up for success. You don’t want any distractions that might take away from the meeting itself. 
  • Be cautious of how quickly or slowly you are talking. If you’re talking too fast it won’t allow the investor to jump in with questions and commentary. If you’re talking too slow, it can be awkward and the pitch will take too long. 
  • Be mindful of your presentation style. An investor meeting can feel long if it’s a boring company. Make sure your conversation is fun and engaging.
  • Be direct. Ask what the next steps are and when you should follow up.   

Are you gearing up to raise money and reach potential investors in a post-COVID environment? We want to help. Schedule your free 30-minute consultation to have your current pitch deck reviewed and to discuss virtual fundraising opportunities with Justin Harris, VAULT’s Head of Strategy.