How Can Startups & SMEs Raise Capital During a Crisis?
December 8, 2020 | Joyce Ibrahim
While the COVID-19 crisis struck a blow to startup and SME funding earlier this year, startup hubs in Europe, Asia, and North America witnessed great progress in funding in Q3.
And although financing tends to slow down during crises, the COVID-19 crisis has been gentler on small companies than earlier recessions, indicating that there are still great opportunities for startups to receive the funding they need to execute their visions.
Here are a few tips to help your startup or SME raise capital during the ongoing crisis.
Start from within
Before you start raising money, it’s important that you bootstrap. By restricting your spending, you can better define your actual cash requirements before taking any steps towards funding. This will also help your business stay afloat while you pursue viable solutions.
Here are a few initial action actions you can take:
– Halt non-essential expenses (travel, hiring, training etc.)
– Postpone market expansion
– Re-negotiate supplier payment terms
– Review 3rd party contracts and make changes when needed
– Focus on quick revenue opportunities
Determine how much money you need & how you intend to use it
After slashing your non-essential expenses, you can now define exactly how much money you need to keep your operation running and growing. It’s crucial that you lay out a clear and detailed plan, elaborating on how the money is needed, paired with a strategy for how this money will be invested.
Remember that investors’ appetite is generally more selective during crises and instability, and if you don’t have a thorough and convincing strategy to grow your potential investors’ money, your business will likely fall through the cracks.
Define & understand your audience
Once you’ve compared solutions and decided that raising capital is necessary for your business, it’s important that you understand investors’ mindsets. You can start by doing your research and laying out a list of investors and VCs you want to target. Approaching your current investors who already believe in your business goals can be a great starting point, and you can also leverage their network to raise capital. It’s also critical to understand investors’ varying appetites and priorities, as this will help you realign your pitch to their goals and reassure them where they may have concerns.
Perfect your pitch
Pitching to investors post-COVID19, keep in mind that what was valid six months ago is no longer relevant today, and this should be clearly reflected in your pitch.
Showcase your predictions of the future of your industry, and demonstrate how your business can fit into that climate. It’s also important that you communicate the changes made to your strategy to accommodate the new landscape, but also how you plan to navigate future scenarios. Furthermore, if your business doesn’t have a unique value proposition that truly stands out, chances are the financing you’re seeking will go to a company who does. That’s why it’s extremely important that you explain how your business is positioned to be the next big thing in the new normal. Remember that investors are looking for solutions that can reach public markets. It doesn’t matter if you operate breakthrough technology if you don’t have a go-to-market strategy, because without it, you will likely lose the funding you need to fulfill your vision.
Need help with raising capital? Find out how Brakket Invest can help!