Thursday, September 29, 2022

Fundraising Tips in Challenging Markets

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Shreya Christinahttps://cafe-madrid.com
Shreya has been with cafe-madrid.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider cafe-madrid.com team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Co-founder and CEO of Group14a battery technology company elevating all batteries with silicon to accelerate electrification.

Today the markets are cloudy with a chance of a recession. But amid the uncertainty, we still see venture capital firms optimistically raising new funds and investing strategically in technologies to come out stronger than before. At the same time, these economic waves are sure to hit businesses, so leaders need to build a strong foundation to weather the storms.

After founding, nurturing and financing three companies, including leading the final $400 million financing of my current business, I can attest to the grind it takes to pull this off through bear and bull markets. Now, more than ever, it’s important for founders to take some important evergreen lessons to navigate whatever the market has to offer them.

Plant the seed

From the outset, identify investors who are fully invested in your mission and not just for quick returns. I learned this lesson the hard way with my second startup. We were trying to close our first major investment round and then the market crashed in 2009, a period even more stormy than today. Understandably, the onset of the Great Recession caused all of our investors to pull their termsheets – all but one. That capital injection at such an early stage ultimately saved the company, and because of that company’s belief in our technology, we persevered and eventually we were acquired years later.

That’s one of the most powerful lessons I’ve been able to remember: Find partners who truly believe in you and your business and who will stand by you through thick and thin. From sudden economic downturns — like what we’re experiencing right now — to persistent supply chain shortages, startups face myriad hurdles. In part, growth will depend on partners who also have complete confidence in you.

Start with Strategic

When preparing for a Series A round, evaluate the approach that best suits your startup. Most companies develop an idea in a vacuum, build a presentation around the dream, then work through a list of VCs on Sand Hill Road to see what sticks. Only after the check arrives at the bank does the team go to the races, using the investment to validate their technology or product.

The problem? This strategy does not work in highly technical fields such as materials science or battery chemistry. I once spent two years educating a single investor about the energy storage landscape before he really understood the global demand for the technology.

To mitigate the finicky source of capital, you need to find and secure your strategic partners. While this method requires a more sophisticated approach, these types of partners offer startups more tactical opportunities, help identify significant risks, and provide a more hands-on way to scale – all while bringing years of institutional knowledge. Most importantly, they are in a better position to validate your technology. If you have something worth growing, strategic investors will give you the validation you really need to take the technology, product or idea to the next level.

In addition to building relationships with investors, your first five rounds of hires will be the most important factor in determining the success of your business. Your core team is the innovation engine for the company, and their synergies and collaboration determine how well you can develop your technology, so keep an eye out for creative and visionary team players.

Growing worldwide

Your Series B round should show you both your ability to reduce some risk factors, especially in these choppy waters, and your potential to scale. With this commitment in the ground, follow-up financing from early investors will allow you to move forward even faster. As much as you’d like to see new sources of capital, watch how certain relationships evolve and help strengthen your team’s work and technology. Keep those early relationships healthy; the validation of the companies will not go unnoticed by the world.

But now it’s mostly about gaining global recognition. Going global requires breaking cultural and language barriers, which is critical in today’s global marketplace, especially for industries like energy storage that permeate everything we do, use and touch. Partnering with investors from all regions of the world is critical to growing your product. It may take countless WhatsApp calls spanning multiple time zones, but these investors will be key to understanding the nuances of unique markets in different parts of the world. This, coupled with the skills of international strategies, opens doors to new perspectives that will be incredibly helpful as your business takes steps to scale further.

Conquer the market

If you hit a series C raise, congratulations. It’s time to conquer the market and conduct large-scale, market-oriented commercialization. By now, your technology can start to speak for itself with more history, data, and third-party validation. While some companies may be able to commercialize earlier, you don’t feel like you have to get ahead of your skis. Learn key lessons from Series A and B, which should provide clarity on how to perfect your technology and strengthen your team and investor relationships—an important foundation for staying resilient to market prospects.

Series C is no longer about selling the dream on PowerPoint slides; your technology, customers and shipments all act as points of evidence. The circle has come full circle and now is the perfect time to refocus on broader financial investors who can help meet the high capital requirements required by this rapid growth phase.

More than ever, tech startups need to gain the trust of the right investors to keep up with the waves of today’s changing market. From forging long-term investor relationships to strategically building your core team to commercializing your technology, each initial series increase offers the opportunity to build a stronger foundation for the future of your business.


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