Keep Calm and Carry On — Tips for Survival and Successful Fundraising for Founders During the Current COVID Crisis

Communication:

• Clear communication with your investors, stakeholders, customers, team members. Anyone and everyone who is associated with you needs to be clearly and honestly communicated to. This will provide comfort in a time of uncertainty.
• Clearly define your goals and share it with your stakeholders so they are aware. Talk to your investors about your current cash in the bank, runway and let them know beforehand if you need any kind of help. Connect and communicate and take the opportunity to demonstrate leadership in uncertain times.

Bring down the burn rate:

• Stretching every dollar to capacity is key to survival. There are tough decisions to be made with regards to cutting costs and the decision may not be clear cut in some cost categories given the uncertainty in revenues. Cash conservation is essential, to be able to live to see an easier fundraising cycle. Lean, efficient and recession proof business models are the need of the hour- easier said than done.

Be realistic about the short, medium and long term:

• Understanding how the new realities imposed by the pandemic impact your business will make it easier to implement changes. Constantly reevaluate the changing landscape and make readjustments as necessary. Be realistic about whether your business can survive a recession.
• Involve your team in the hard decisions and bring them along while making difficult decisions.

Don’t panic and be patient:

• If you don’t need capital, then don’t fundraise now. Pricing is in a flux — once all uncertainties regarding revenues, markets etc are factored in. Investors are waiting to see how the market moves. Instead take this time to understand your customers and investors’ needs better.
• If you need capital, don’t panic and call every investor who may write you a cheque. Instead look for alternatives like government funded programs such as Innovate UK in the UK that has given grants to seed stage companies to tide them over the next few months. If you are able to fundraise then make sure you are covered for 12–18 months since the full effects of this downturn will take time to manifest.
• Fundraising cycles will almost certainly take longer. Writing cheques without a face to face meeting is unusual for most investors, even while investing in businesses with compelling models.
• Investors’ own portfolios may be in need of urgent attention and while they are taking meetings — it may not mean that they are actively looking to invest. As an entrepreneur it is important to do your due diligence on the investors you are hoping to fundraise from and be patient always as they might be open to investing in the future.

Be pragmatic yet creative with term sheets and pricing:

• Discounted valuations are a bitter pill for any entrepreneur to swallow. However if you think a low ball term sheet will help you survive — it may be an option to consider.
• Also think of new ways to beat the low current valuations, for example, if you expect the business to pick up in 18 months then peg your valuation not to a number dictated by the prevailing low valuations but one tied in to your future revenue number. Of course most of these provisions will mean a reset if future operating numbers are not achieved.

Plan Scenarios — A,B,C

• Identify areas of vulnerability, measure the risks, and decide which of these can be addressed and mitigated early. Ideally, you should already have measures in place to diversify revenue streams and make sure that your financials are in order. Run different financial scenarios keeping in mind to plan for the short, medium and long term under normal circumstances vs the current covid crisis. However hard it is, you need to plan for the worst case scenario as well, but never lose track of your long term goal and vision. This will keep you motivated to stay strong in the long term. Planning ahead will help you to know when to take swift action, pivot and make changes accordingly.