Raising Capital From Investors During a Crisis

This post originally appeared on the Louisiana Technology Park blog.

The first wave of the COVID-19 pandemic nearly ground venture capital investment to a halt, which made fundraising exponentially more difficult. 

While coronavirus affected all fundraising stages, the seed stage sustained the largest impact, dropping by 57%. And when venture capitalist firms did start reinvesting, most of their new investments occurred within their existing network. Now that things are picking up again, the time is ripe for raising capital for your startup.

“Investors are now going back out and looking for new deals, which is a good opportunity for startups, says Peter Liu, who recently joined New Orleans-based Revelry as Managing Director of Venture Capital after spending 8 years investing in early-stage startups at Pritzker Group. “They’re actively looking to build up that funnel again.”

Raising capital during a crisis isn’t easy, but you can make it happen. Liu explains how.

Modify Your Fundraising Goals

Evaluate how the COVID-19 pandemic has changed the landscape of venture capital during the COVID-19 and plan to modify your fundraising strategies in response. Most venture capital firms are limiting their investments. Before the coronavirus, investors were actively seeking deals, but now there’s a surplus of opportunities and a finite dollar amount to put toward them.

For all of these reasons, your fundraising process may take longer than you expected, so start looking for investors earlier than you originally anticipated — plan for an expanded timeline on your fundraising process. Instead of waiting for the final three months of runway, start raising the next round with you six (or more) months of runway left, Liu says, to prevent gaps in funding.

Try to raise more than your initial goal, too — though be aware that this could increase ownership dilution. “The amount of ownership you’re going to give up in the company by raising more money may be more than you originally anticipated, but that’s the trade-off for having a solid balance sheet to ensure survival and that you can hit the milestones you need to hit as a company,” Liu says.

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