We’re in a global pandemic. The simple truth is that all venture capitalists have told their portfolio Founder/CEOs that if they don’t absolutely need to raise capital now that they shouldn’t be out there attempting to do so. Wait. Wait until fall. Wait until 2021. Wait until the situation changes.
So why should you follow a different approach? Either the traction that you as a Founder/CEO experienced both before and subsequently because of the health crises is so overwhelmingly positive that fundraising will be an easy task -or- you’re headed out fundraising, well, because you have to. A fact of startups is that they run with limited cash and the current situation just happened to inadvertently catch many companies unplanned at the wrong time in a fundraising cycle. If founders must raise now, or soon, then there are three approaches to addressing the current situation.
1) Simply ignore it.
The simplest and most straightforward way to fundraise is to craft a fundraising story that merely doesn’t directly address the current health & economic environment. After all, especially for companies at the earliest of stages, ostensibly they will be building over the next decade or more, and are playing into megatrends that in the long run will vastly outweigh any temporary setbacks from a temporal crisis. When your startup is going public in 2028, (hopefully!) the Great Covid Crisis of 2020 will be well behind us.
The problem with this strategy is that it demonstrates a lack of awareness, or at least acknowledgement. And if an entrepreneur dusts off a pitch deck that was put together in February but temporarily put on hold, I guarantee that the first question out of a VC’s mouth after hearing the pitch will be, “Well, what about Covid?” At the very least, a prepared appendix slide which can be easily & quickly referenced can evidence some forethought and deliberate consideration to the issue, all the while still signaling that you don’t consider it a major roadblock in the life of the company’s journey. But why start on the back of your feet? Rather than being defensive, there are other opportunities to react.
2) Proactively and directly adjust & react.
My partners and I have been impressed and perhaps not-so-surprised with the nimbleness and ingenuity in entrepreneurs’ response to the pandemic. However, some of the new ventures crossing our desks… consumer subscription cleaning wipes, UV ray based pathogen killers, air testing for commercial buildings… are almost too reactive to the situation. Sure, there is certainly opportunity for those offerings in the market right now. But what about 18 months from now, or even beyond then? There is risk that many of the reactive businesses are just excessively near-term and missing the broader & longer, bigger picture. I don’t doubt that there is opportunity in some of these offerings, but I question if there is a long-term sustainable venture that’s appropriate for venture capital.
And while your startup’s product may not be as overtly reactive as some of the examples which I shared, there is meaningful risk in over-reacting to the pandemic in your startup’s fundraising pitch. The primary focus of the narrative shouldn’t be just about Covid and how your startup is capitalizing or optimizing in the current context. The more heavily the story weighs on a situation with uncertain duration, the more likely an investor is going to discount current successes and milestones, instead focusing on likely effects when restrictions subside.
3) Explain why the future has been “pulled forward.”
A third approach to pitching in a pandemic is a balanced one, neither ignoring nor over-reacting to it. Of course that’s logical. But I’d also recommend a nuanced way to capitalize on the existing environment in that balance: explain how the trends your startup have been capitalizing on since the beginning are accelerated by the pandemic.
How has an inevitable future world closer to now? Trends like openness to telemedicine, further e-commerce adoption, viability of remote & distributed workforces, and rethinking eldercare were already becoming a reality when the year started… now that reality has and is manifesting sooner and stronger. The question to proactively answer in a pandemic pitch is: what wave was your startup riding when you started the business that subsequently post-Covid is larger and more pronounced?
When a fundraising story is framed that today’s landscape is now an integral part of the future, rather than a prelude or diversion prior to it, then the (uncertain) timing of the lifting economic restrictions and an eventual vaccine become secondary to the more important narrative about the business. Success is inevitable because what lies ahead now isn’t so far away.
Startups currently in the early stage are going to be building for perhaps the next dozen years. Today’s challenge will likely be the first of many, not just the initial and only one to overcome. Pitching in the Pandemic requires a story which addresses the now… but it should also frame the story within a long-term perspective and enduring trends.