Looking for startup funding during the pandemic is more challenging than it was in the old reality. Yet, it is not impossible and the changing world made several aspects of startup financing even easier.
The COVID-19 pandemic is far from over and the number of deaths and infections are still rising. WHO data indicates that by the 11th of December there were over 68 million confirmed cases and 1.57 million confirmed deaths.
The pandemic has affected 220 countries globally, taking a severe toll on Europe and America. Despite the public availability of the COVID-19 vaccine, staying isolated is currently the best and most reliable way to prevent the virus from spreading.
This isolationism resulted in a great transformation in multiple businesses from retail and leisure, to Venture Capital and startups. The transformation and overall impact of COVID on the VC and startup ecosystem has been described in “How COVID-19 Changed VC and Startup Reality”.
Apart from the general and macroeconomic analysis, the report includes advice on getting startup business funding during the COVID-19 outbreak. According to the report, the number of investments has dropped by 30% when compared to 2019, yet the average value has risen by 33% YoY.
The rise in the average investment value has been seen in nearly all industries.
So, venture capitalists are not halting their investments, but rather have gotten pickier when choosing a company to invest in. So, how do we get startup funding during COVID?
How to get funding for a startup
The Tooploox 2021 report focuses not only on showing data on the new reality of the startup world, but also provides advice from VC experts about how to operate in the challenges of the COVID world.
Experts from Market One Capital and Viking Ventures, as well as an expert angel investor, delivered three pieces of quality advice:
No more traveling – go online
Silicon Valley used to be the final destination and a holy ground of the startup world. Thus, it was obvious for startup founders to travel there or at least consider it when thinking of how to get funding for their business.
The pandemic has changed this approach significantly by reducing the ability to travel, both internationally and domestically. So it no longer matters if the founder came from Nebraska or Estonia, one was equally stuck in his or her place, with no way to access the world’s top VCs.
But this works both ways. The VCs are still hungry to spot new interesting investments, yet their specialists were unable to travel.
Thus the trend of working remotely and dealing with business via online meetings became popular in VC practice. According to the report-quoted experts, it has become possible to gather funding fully online – from introductions, through due diligence and on to final arrangements.
So, contrary to the pre-COVID reality, it is now acceptable for a startup founder to stay at home and arrange online meetings with VCs – the cost of living in California can be murder, while being on-site does not deliver a significant boost to revenues, especially considering the fact that the meeting will probably be held online either way.
In the end, this trend brings VC funding out into a wider audience, granting VCs access to interesting startups around the world, and new startups access to the funding they need no matter where they’re based.
No need to have an office
Having an office was an unofficial and unspoken border between a “professional” and “unprofessional” company – and the approach has been reflected in VC’s attitudes. But with the lockdown, all companies that were able to go offline did so. Including VCs.
The experience of working from home varies and bears multiple advantages and disadvantages. Yet it became official and proven that working remotely is as “real” as that done from the office.
This came with the conclusion that there is no need to have an actual office to run a successful company. And with that conclusion, the chances for an officeless startup have risen. Also, the office can be a good source of savings, assuming one abandons those rented or selling off or renting those owned.
Group up your metrics
Last but not least, the advice was to deliver more reliable and measurable information about the company’s performance.
“Do your homework first.”
The VC experts quoted in the report highlight that in these times of VCs becoming more picky and cautious about their investments, a startup looking to gather funding needs to deliver metrics that will convince investors that there is huge potential in the company and the people building it.
Depending on the product and the service delivered, the metrics differ, yet initiating the contact without the “homework done” can be a great mistake from the founder’s point of view.
Other highlights from the report
The report delivers a comprehensive overview of COVID-induced changes in the startup and VC ecosystem. Thus there are additional insights on the new reality and how to deal with it:
- VCs were already hardened against the upcoming crisis, so the impact of the COVID-outbreak was limited and the overall slowdown had already been foreseen.
- Despite the ongoing crisis triggered by the pandemic, there are multiple winners in the situation, with streaming services and online entertainment providers included, among others. On the other hand, being one of the “covid winners” is not a recipe for getting noticed, as VCs rarely invest based only on the current situation and performance.
- There were interesting pivots where companies were able to swiftly switch from a business rendered unprofitable during the pandemic toward new ways of earning money.
- Startup funding aims to invest in growth potential, so it is much better to analyze which challenges will haunt the world in upcoming years rather than run madly for the COVID-induced challenges. On the other hand, the pandemic is a great time for healthcare-oriented startups.
- Companies should establish a connection with venture capitalists before looking for funding. Simply asking questions and following published information can save a lot of time and effort on both sides.
A Summary of how to get funding for a business during the pandemic
The pandemic has delivered significant pivots regarding the reality of getting startup funding. Due to the crisis and movement restrictions, startups were forced to switch from the bold “fake it till you make it” attitude toward a more accountable and responsible approach.
If you would like to get more information about the reality of startups and VCs during the COVID-19 pandemic, download our report now!