TIPS FOR RAISING FUNDS DURING A PANDEMIC

As we already saw in The Effects of COVID-19, the fundraising landscape under pandemic conditions is considerably different to normal. There is venture capital out there, but accessing it is even harder than usual at the moment.

This is particularly true for seed and early-stage startups – investors are less keen on risk under current circumstances. They’re leaning towards the slightly safer bets that later-stage companies represent. And if they do still have an appetite to gamble, they may only take a chance if they can get a cheap deal.

All of which makes this a good time to think outside the box when it comes to raising the finance required to not only keep your startup alive in the short term, but also to keep any existing momentum going.

In times such as these, it is especially important to investigate alternative funding options such as grants and loans

Investment is just one of the ways a startup can raise money, after all. And other sources of capital often come with fewer restrictions and less pressure than a traditional investment round.

Wherever you are in the world, for example, there’s a great chance that there are some government funding opportunities out there specifically related to COVID-19 economic stimulus. Don’t assume your options are the same as they were before the pandemic – and keep an eye on relevant news channels. Impactful, ‘green’ or community-building startups are particularly popular with politicians right now and could be first in line for support.

Ireland is just one of the countries to recently announce a package, namely €48 million in funding for high-potential startups, including both new ones and those affected by the pandemic.

• Speaking of governments, ask yourself if there are any ‘public’ clients out there you could target.

Long-term contracts or tenders are an ideal source of reliable, long-term cash flow, and even better than a grant because they offer you a chance to show off your value for a real customer and get your name out there. While private clients might be on the back foot at the moment, governments, public bodies and institutions still need to function and still need solutions – do they have a use case where you can help?

• Similarly, it might be time to look at business clients you haven’t considered before.

Which industries are thriving in the pandemic? Digital healthcare and teleworking solutions might be just a couple of those areas in which companies are growing fast and may need help in doing so. Can you play a role here? Perhaps you’re a consumer-facing startup…but this isn’t the time to limit your thinking!

• What about investing your own personal money?

This is a big decision and much depends on the traction your startup is getting and the expected costs up ahead. But there may be situations in which selling the car in order to give your venture a push in the pandemic makes perfect sense. Consider the case of Laally founders Kate and Max Spivak, covered in this article by Crunchbase.

• Then there is the option to borrow cash from a lender.

That’s another decision not to be taken lightly. You’ll have pressure in a different form, but it’s worth noting that not all lenders are out to break your knees at the earliest opportunity. There are flexible models out there, as well as lenders who work specifically with startups.

• Don’t forget that governments can also be lenders.

As such, they may not be completely hung up on repayment either. Take for example the recent news that the UK government took equity in 37 startups to which it had lent money to help them grow during the pandemic. If state loans are available, they’re worth at least looking into in such uncertain times.

We wish you all the luck in the world in your funding quest!

Prepare for your upcoming negotiations by having the first valuation overview in hand.