How to Adapt Your Fundraising Strategy in The Bear Market

• February 13, 2023

Raising funds for your startup can be challenging during economic uncertainty. Despite this, some of the most successful companies were started during such periods. In this article, Lance Cottrell, an entrepreneur, investor, advisor, and mentor, explores how to adjust your fundraising strategy for success during these times.

Investors become cautious about making new investments during economic downturns, particularly angel investors who fund pre-seed and seed rounds using their personal investment accounts. As these accounts decline, investing in high-risk startups becomes difficult. On the other hand, venture capitalists have funds, so they don’t feel as much pressure but tend to act more conservatively. All investors will be more selective, take longer to make decisions, and negotiate harder.

Valuations will decrease due to the laws of supply and demand – fewer investors chasing the same number of deals. Investors now want to see a longer runway of 24-36 months before the next funding round, giving startups more time to navigate a potential downturn.

To increase chances of securing funding, startups should consider developing a path to profitability in the short term. They should also focus on revenue-generating strategies and discuss these in their pitch. Capital-efficient companies are favored by investors, so startups should consider reducing upfront costs to reach the market.

In conclusion, startups should adapt their fundraising strategy to economic uncertainty by prioritizing revenue and considering ways to reach profitability. A longer runway and capital efficiency will also increase chances of securing funding.

Read more in the original article.