How hard will it be for you to raise money in the aftermath of COVID-19? No one knows for sure. But I have a pretty good idea because I raised $12M during the Great Recession.
I'll give you my thoughts on how the funding environment is likely to change, whether it makes sense to continue raising money, how long you should plan it taking you to raise money, and more in this short video.
Read The Video Transcript Below:
Hi, I had several questions regarding how will the fundraising environment change in the aftermath of COVIT-19. And here's what we know and here's what we don't know. I can, from my own experience of raising money during the Great Recession, almost guarantee you that the fundraising environment is going to get much, much more difficult.
And there are a few reasons for this. Number one is if you look at it from an investor's perspective, typically venture capitalists are going to protect their existing investments first. That may mean they have to put more cash that they've reserved for existing investments than they thought. That's one reason. So that's going to be their first priority. The second thing is the bar's going to get really high.
Probably in the past couple of years, it hasn't been so high. There's a lot of easy money out there, or at least there was a lot of easy money out there. Now it's not so easy to get funded. Maybe it never was, but now it's really hard. So you've really gotta be on your game if you're going to go raise money. You've got to get it right. You've got to do well, and if you don't do well, forget it. It's just not going to happen.
So that's what I think is going to happen. I think it's going to be really, really difficult to raise money, at least for a bit of time, maybe a year, maybe longer. So if we're sitting here and it's March of 2020 it could take you to all the way, at least this is what I'm advising people, all the way until September, 2021 before you're able to raise your funding.
So be prepared. It's going to be a long slog out there in all likelihood. Maybe you'll get lucky, but be prepared for the long haul. I think that's the biggest thing that we know now. What do we don't know? We don't know if investors' interests are going to change. In other words, what markets were investors interested before COVIT-19 and what markets are they interested in after COVIT-19 and I'm, I'm no good at this kind of stuff. Quite frankly. I can't figure it out and I'm not going to try and figure it out for you.
Here's what I would tell you to do. If you have a great business and it's fundable, which means it's growing at a reasonable rate, especially if you're later stage or actually early stage too. It doesn't really matter. Then go for it. Find the right investors, go for it, and you know what? If you have a good story to tell then investors are going to invest.
Don't worry about how the world is changing. Worry about developing a great company. Worry about your execution. That's what's going to be important at the end of the day. All of this other stuff, all this speculation won't matter.
But finally, let me go back to the other thing that comes with a higher bar. The valuations are going to be lower. That just goes without saying. Don't expect to get that same super high valuation that you might've thought you were going to get before all of this happened. That's gone. I can almost guarantee it. What are you going to get now? A much lower valuation because the bar is higher. They're going to be investing in less companies. There's going to be more scrutiny, more diligence, more time is going to be taken. And unless you get really lucky, the valuation is going to go down from what you thought. That's okay because the most important thing at the end of the day is getting funded, not getting the perfect price. I hope this helps. I'm Brett at brettjfox.com. Have a great, great day.