In a matter of a few months, the world has transitioned to a new reality. Most of the global business activity has come to a standstill and businesses have had to pivot their operations to adjust to a climate that is rife with uncertainty. As the world reels from the economic impact of COVID-19, young businesses may be suffering the most due to the lack of start-up funding.
The Impact on the Start-up Ecosystem
The stakes for a start-up are already high. They are short on capital and hence involved in a rat race of attaining funds. So the occurrence of COVID-19 makes things much worse for their future outlook.
According to a report published by research and policy advisory organization Startup Genome, up to $28bn in start-up investment could be lost globally in 2020.
Things aren’t any better on the operational side. 42% of startups globally have 3 months or fewer of runway left while startups that have raised Series A, B, or later rounds, 34% have less than 6 months worth of cash.
The Silver Lining
There is light at the end of the tunnel!
There is no denying the fact that start-up funding will diminish but it will not completely vanish.
The funding capacity of Venture Capitalists around the world is still intact. They have a healthy supply of dry-powder in funds that they can invest in businesses that they believe are worth it.
Now you may be thinking that’s all well and good but what steps should my start-up take to protect and grow itself during this time?
Let’s have a look at what you should do.
How can you attain Start-up Funding?
1. Adjust your goals to the new normal
The last few weeks are a testament to the fact that nothing is guaranteed. What you need to do currently is to embrace the uncertainty. The next few months will be difficult for your company and you have to make every decision in light of the current circumstances.
A good starting step would be to adjust the 2020 growth plan you mapped in December 2019 (if you haven’t already).
The investor community will now shift its focus from growth at all costs to reasonable growth with a path to profitability in the current climate.
According to Anthony Millet, Partner of a VC, “your goal should be to raise as much money as needed to get to your next ‘fundable’ milestone. One way to look at the optimal amount to raise in your first round is to decide how many months of operation you want to fund.”
Thus, you should adjust your business plan and messaging accordingly.
2. Adjust your Start-up Funding approach
If you need to fundraise during this time, then it’s best to reach out to your existing investors first. It’s crucial to keep the dialogue up and running with these investors to find further opportunities for your company.
Once you’ve exhausted your list of current investors, then you should reach out to other investors who you have gotten to know well over the last few years.
Will fundraising in the current climate be difficult? Yes.
Is it impossible? No.
Start-up founders need to start mapping out their fundraising goals and timelines in light of COVID-19. There is always a window of opportunity in every crisis. All you need is an understanding of what works and what doesn’t.
This is where Trivium Global can help you. Trivium Global can offer custom financial advisory services for your enterprise to help you reach your goals in this COVID-19 market landscape.
Trivium can ‘power-charge’ your strategy and finance functions during this uncertain phase while helping you keep an eye on the bottom line.
Our team is experienced in guiding startups through turbulent times. We can help you adjust and reach your business goals and funding plans.
If your startup is suffering during this phase, our experts will be glad to provide you a free customized consultation based on your needs.
You can schedule a call by filling the form below. We’re here to help!