In any circumstance, fundraising for your business by holding talks with investors is probably one of the hardest things to do, but under Covid lockdown the task can seem especially Herculean. If you’re fundraising now, here are some thoughts to best manage it from a VC’s perspective:
Bear with us
As a tech company, you are likely accustomed to distributed teams, virtual meetings and remote working. You may even be a natively remote organisation like Github with over 1,000 people working 100% remotely.
However, it’s important to remember that VCs are actually small scale financial services firms. As you may know, financial services is quite far behind sectors like tech on the “future of work” adoption curve. So tools that are old hat for you may be quite new for us.
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But, surprisingly, old dogs can learn new tricks. Faster than we thought possible, we are getting used to the day-to-day of remote working and finding the work gets done just fine. But please do be patient with our slow home wi-fi, Zoom camera snafus and perennial inability to find the mute/unmute button right when we need it!
Without IRL meetings, VCs are missing a piece of the puzzle
I think we can all agree, Zoom is not a like-for-like replacement for in-person interactions. Experts have gone into detail on the psychology of this. Bottom line for fundraising: it is hard to replicate the critical IRL (in real life) pitch meetings between entrepreneurs and investors.
This is not a trivial loss for investors. In a typical fundraising process, investors use several in-person interactions to reach an investment decision: a formal founder pitch to VC partners, multiple follow-on meetings for due diligence, site visits to meet the rest of the team, and perhaps after-hours dinner or drinks. We rely on these interactions to make judgement calls on founder quality and team dynamics. With VC-startup relationships lasting as long as the average UK marriage, developing this human relationship and understanding founders’ character is critical.
Because a core piece of the investment puzzle is missing (even leaving aside the economic impacts of Covid), don’t expect decisions made by investors on the same timeline as before lockdown. Be patient with us as we try to creatively replace these IRL interactions or wait until we can have them safely.
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Frontload the work
So what can we do if we need to delay the in-person work until after lockdown?
I would recommend front-loading initial meetings and information sharing. There is quite a bit you can do remotely to get investors familiar with your business. During the lockdown, I’ve been able to replicate a good 90% of my work. I’ve done initial getting-to-know-you meetings, product demos, technical deep dives, financial model walkthroughs, market research and customer references. In fact, many VCs are grateful for the extra time for deep thinking about the investment thesis that lockdown can provide.
This is important work to building conviction, developing a relationship with the entrepreneurs and socialising the investment amongst decision makers. Put most of the puzzle together ahead of time so that after lockdown, IRL meetings can be held (safely) and final decisions taken (swiftly), and the last piece falls into place.
When we can’t see each other face to face, it helps to compensate through extra communication and full transparency.
I’ve been trying to diligently follow up after meetings with emails to make next steps and action items explicit. With companies that we plan to take to the investment committee in a few weeks, we stay in close contact through weekly catch-up calls to check in on trading and on progress in fundraising with other investors in the syndicates.
When all our interactions are forced into digital channels, it doesn’t hurt to over-communicate so that everyone is on the same page.
The overarching takeaway is that amidst Covid, life and deal flow do carry on under lockdown for investors. Please just be patient with our tech skills, empathise with our desire to have some IRL interactions with you (or be open to creative replacements), front load work that’s appropriate, and stay open and communicative. We’re almost on the other side!