Covid-19 Crisis and Startup Investors
A silently waiting out the crisis is not the best solution for any ongoing startup. On the contrary: you need to talk and communicate openly. After all, you yourself, your investors and partners have not gone anywhere.
There are different types of funds and private investors. Given the crisis situation, many of them may tighten investment criteria or stop investing altogether - but investors will never say so out loud. So, you will never know about it and will continue to waste time on meetings in vain. For startups, as never before, it is important to closely monitor the experience of funds in order to increase their chances of a successful transaction.
Study investor deals over the past couple of years
Pay attention to how many public transactions investment funds have over the past year. Ask for feedback from startups in which this fund has invested previously. Examine the profiles of the fund itself and the partners of this fund on social networks. Active investors write a lot about the startup industry, brag about deals, negotiations and online meetups.
Find out where the funds are financed in order to correctly evaluate your chances.
You can save a lot of time if you take into account the source of investor funds and communicate only with those who are really ready to invest money.
For example, family offices (the type of family funds and “pocket” funds in companies) usually invest from the operating income of their core businesses. If these businesses were hit by the crisis, then they themselves will need the money and then new investments in startups may temporarily stop. It’s better to immediately ask again if such a fund is ready to invest in the next month or two or whether they get to know you “for the future”.
The same goes for private investors since very often they are the founders of large companies and successful businesses. Their funds are dividends and bonuses, and the investment process is their expensive hobby. If their main business is covered by a wave of crisis, then there will be absolutely no time and money for a hobby.
Angels will continue to invest, but expect smaller rounds, at lower valuation, in companies that don’t require large amounts of cash.
Venture capital funds
Classic venture capital funds (VC) are usually structured so that they collect a certain amount of money that they invest for several years. Due to different situations, such funds can change the number of investments per year, but they rarely stop investments altogether. This is one of the most reliable partners among the above.
Look for alternative ways
Here and now many traditional methods to search for investors are not available. An alternative is to try to reach investors more often through their portfolio companies.
An alternative is to try to reach investors more often through their portfolio companies.
Startups are often ready to support promising market colleagues and organize an online meetup with a fund company only if you have something to offer their investor. It can be any idea especially relevant in time of pandemic such as a new vaccine or toilet paper detector map.
Anything goes since the world is open for new ways of survival. Start with forming a business goal and strategy. Then create a professional informative website, 10 pages pitch deck. Write down what you are doing, what results you have already achieved, who you want to get to know, and why you think that this investor may be interested to get to know you. Always give an ongoing example and successful result using infographic language which is a shortest ways for any business to explain the idea.
Protect your startup from risks
A lot of news comes about the thousands of affected businesses whose employees got #coronavirus. The governments of these countries already promise tax incentives by the end of the year and almost interest-free loans for business recovery. But, to be honest, it will be much better for your company if all your employees remain healthy, learn how to work remotely efficiently and continue to grow. Your potential investors are thinking the same thing.
If the key people in your team get sick, this can jeopardize the growth of your company, which means that the investor’s money will be at risk. Take care of the health of yourself and your team to increase the chances of attracting investments this year.
Focus on revenue growth
For various reasons, the number of investors in the world will decrease slightly and competition for investor money will increase. Those investors who remain in the market will have the opportunity to choose the best of the best. Therefore, your business performance will come to the fore even more than before.
Many offline companies and events will suspend advertising and activity, which will lead to a decrease in the average cost per click on an ad. For some, this will be a good opportunity to improve the most desirable metrics among investors - lower the cost of user acquisition (CAC), increase monthly income (MRR, for example) and income per user (ARPU and LTV), improve weekly growth (retention rate and week- to-week growth). Analysis of metrics is also a good reason to reconsider what is really worth concentrating on now and what is simply stealing your resources.
Be that as it may, now it is important to maintain positive thinking, continue to develop and remember: any crisis is good because it forces you to make innovative decisions and see opportunities instead of risks.