How to Capitalize on Opportunity in Times of Crisis
While the onset of the COVID-19 pandemic touched every single member of the global business community, startups felt a unique impact. Across industries, early-stage companies experienced a drop in consumer demand and many were forced to scale back operations, bracing themselves for the worst. Emails from investors poured into founder and CEO inboxes reminding them that history showed quick and decisive action as the most prudent path to survival. By May, global VC funding had dropped by 20 percent since the early signs of the pandemic in December, as firms reduced spending in the face of uncertainty. The VC landscape transformed within a matter of weeks—and the outlook for funding was bleak.
All that being said, I believe this unfamiliar landscape is paving the way for new opportunities to bridge emerging market gaps and serve as a catalyst for digital transformation at an unprecedented scale. In moments of swift and significant change, it is no longer scale and resources that yield the biggest competitive advantage, but rather the fastest and most agile movers. Having led a Series D funding round during the pandemic, I’ve seen firsthand how startups can be nimble during times of crisis when many larger companies cannot. Ultimately, this flexibility unlocks massive opportunity for growth and expansion.
Raising capital in good times is hard enough; doing so during tough times is an even greater challenge. While the pandemic will persist, and the VC landscape will continue to shift, entrepreneurs should not be deterred from taking steps to advance their missions and push their companies to new heights. With perseverance and grit, leaders must commit to finding the right path forward and take nothing personal along the way.
As we adapt to the new landscape for venture capital, here are three key strategies for capitalizing on opportunity during times of crisis, and beyond.
Identify the right time for your company to fundraise.
With uncertainty looming across the global business landscape, the decision to fundraise is more nuanced than ever; and the risks have been amplified tenfold. A failed round could lead to uncertainty among employees, or consume energy that would go toward building business continuity elsewhere. For many companies, battening down the hatches may ultimately make the most sense for future longevity.
For others, the benefits can outweigh the risks, but entrepreneurs must take time to consider why their business stands to benefit from expansion in this climate. Times of crisis create a unique opportunity to bring new value to consumers and businesses when they need it the most. For instance, in today’s remote-first world, can your offerings fill gaps where traditional processes are no longer viable? As the CEO of a real estate tech company, I knew fundraising would enable us to add more value to the traditional homebuying and selling process, as the industry was turned upside down, consumer preferences evolved quickly, and in-person viewings were no longer a possibility.
Ultimately, startups have the flexibility to make decisions quickly and gain market share, while big companies have no choice but to contract their business. If the worst-case scenario plays out and you still believe now is a better time than ever to pursue funding, go after it with everything you’ve got.
Adapt. Adapt. Adapt.
During the early months of the COVID-19 crisis, the traditional VC playbook went out the door, but it doesn’t take a pandemic to upend this process. Whenever a landscape changes, so must its players. Entrepreneurs looking to raise capital during times of crisis must get comfortable with being uncomfortable.
For instance, selling an engaging story to investors without ever stepping foot on a plane is practically unheard of for a founder building a company outside of the coast. Now, entrepreneurs must find a completely new way to connect with investors from the confines of their own home, even with the unpredictable nature of shared household Wi-Fi, enthusiastic pets, or kids wandering around in the background. Additionally, entrepreneurs face the new challenges of a Zoom pitch: People multitasking on their laptops, side conversations in chat, and “reading the room” of “The Brady Bunch” style faces. Prepare to respond to these bumps with agility, and learn to laugh about them in the process.
The most experienced investors in the world know success is as much about the team as it is the idea and opportunity. How you show up and respond to a crisis allows them to judge one of your biggest success factors before investing. I ran 150-plus presentations during my round, and found that embracing change was the key to a successful outcome. At the end of the day, the way you manage a crisis may ultimately lead to more trusting relationships with investors and, in turn, a greater leap forward for your business.
Align with investors who deeply understand and support your mission.
In times of crisis, finding the right VC partner poses an entirely new challenge because the stakes for firms are higher than ever before. When considering who to pitch, lean into your long-term mission to identify firms which are aligned with your key priorities for the future, so that they see the same opportunity in investment that you see. It’s important to be transparent and lay it all on the line with investors because ultimately it will allow you to move forward together.
For instance, if you’re developing a product that is intended to foster social change, look for investors who share your social values and seek to drive societal transformation beyond business profitability. If you’re looking to acquire a company that will amplify your impact in a specific industry, look for investors who have been successful with acquisitions and know how to spot good deals that can exponentially unlock value or otherwise expand your business.
There are so many forces at play shaping businesses today, from COVID-19 workplace overhauls, to social responsibility, to the political landscape. These factors not only have an effect on the business, but also a company’s broader role in society. Find investors who truly believe in your purpose, because at the end of the day, they will see the same opportunity that you see and support your company long-term.
I have built companies in times of prosperity and in times of downturn, and can honestly, yet cautiously, say that I prefer the latter. Fundraising in times of crisis is no easy process, but it can lead to a tremendous leap forward for your company with the right opportunity, unwavering resilience and a wholehearted belief in your mission. The ability to embrace reality, but take action harder, may just enable you to achieve the impossible.
