Against this downturn that we are facing today, a pertinent question then crops up – how can startups raise funds during a crisis?
Of course, during times of economic expansion, raising capital for a startup or new business is easier. But, what happens when the market turns and we enter a recession?
The current Covid-19 pandemic has caught us all on a wrong footing. Throwing everything into disarray, this crisis has reshaped our priorities. And, at this point of time, if you are managing your own business, raising funds may be the last thing on your mind.
While an economic downturn may seem a huge disadvantage to raise capital during a crisis like COVID, there are steps you can take as an entrepreneur. Investment opportunities can be created, and your business may have a future.
How can an entrepreneur improve chances of success? Obviously the first few steps would be – to help improve your status by raising capital. Here are some tips:
- Be time-smart: Raising money can take time, therefore, it needs to be taken up seriously. This means using your time effectively; be ruthless at times, when it comes to your investors, so that you ensure you pull in good finance.
- Use technology: Since we are now getting used to a new way of working, it is advisable to speed up the process of adopting technology. You can use this to your advantage – like you can replace traveling to meet an investor by video calling! Technology allows you to speed up the process significantly and increase efficiency of work.
- Forge connections: The decision to invest can be personal, so it is crucial to make connections and build a rapport with potential investors. It is a good idea to try and start building this rapport early, as it will allow an authentic relationship to develop. This genuine connection can seriously increase your chances of success.
- Abide by short-term fact-based perspectives: Now more than ever, you need to have a plan. You are asking for investments at a time where most people are cutting costs, so be prepared to prove your value. Have your customer base clearly defined at hand, and demonstrate the way in which they will make money. Remember to look at the short term, not just the long-term; and to raise capital during COVID, you need to show results quickly.
What are the chances of raining capital? Raising capital during a crisis like COVID can be a challenge, but it is far from impossible. With a robust and solid plan, a profitable customer base, and the ability to spot opportunities, success can be achieved. So, first and foremost, remember to be authentic and effectively realistic – at all times.
In fact, key to raising capital from new relationships during Covid-19 lockdowns can be to focus on your existing network. Based on a “web of trust” dynamic, it will allow investors, who don’t know you, to rely on someone in your network, who can advocate for you!