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Advice from 21 VCs | Managing Startups and Raising Capital in a Downturn

As part of our survey to determine whether COVID-19 will slow VC investment, we asked venture capitalists to share their advice for entrepreneurs who are currently raising or plan to raise capital in the next six months. Here's advice from 21 of those VCs.

The bar just got really high.  a) focus on driving revenue, any type of revenue.  b) lower the amount you need to raise.  c) lower your valuation expectations.  d) if there is any way at all to NOT raise, like consulting on the side, do it.  If you have a round in the works right now, close whatever you have committed ASAP. Don't optimize for valuation or size or anything. Just close it.

- Nicole Glaros - Chief Investment Strategy Officer, Techstars

Focus on real "problems worth solving" that will still be problems after this pandemic flattens out. We believe 10x better solutions for real big problems are always worthy of funding.

- Ben Wiener - Managing Partner, Jumpspeed Ventures

It will get much harder as a lot of the tourist capital is gone and VCs are being more careful. All the fundamental guidance with regards to fundraising holds. It's just more important than ever to be at your best. It's certainly a good idea to find top-line and bottom-line methods for extending runway. If you have to take on some short term revenue opportunities, but they allow for further product development and longer runway, they should be strongly considered.

- Nick Moran - General Partner and Founder, New Stack

For new companies, don't bother.  Warehouse your idea and try to keep it alive without external capital.  For existing B2C - Don't bother unless you can reduce burn to a sustaining mode and you have supportive EXISTING investors. Any consumer-facing business is at high risk.  For existing B2B - If you do not serve critical infrastructure (storage, networking, security, privacy) then see B2C, else sharpen your pitch and lower your valuation expectations. The Devil is in the details for the latter. 

- John Ives, Managing Director, Tahoma Ventures

If your fundraise is in process, close now/soon and don't worry about terms. If starting the process, delay it for 3-6 months and preserve cash.

- David Cohen, Managing Partner, Techstars

Without a doubt hit and if possible exceed your fundraising milestones; reduce burn, increase runway however possible/ be creative; recognize you are entering an environment were equity capital will likely be more scarce not because of dry powder but because of increased bar for investment of similar historical stage, and also investors are going to need to focus on supporting their existing portfolio investments (lever that angle).  Also, the pricing environment may get more competitive.

- Les Craig - Partner, Next Frontier Capital

Create several plans and identify key decisions that need to be made which can be driven by data. IE. when revenue falls by 20% for 14 days, we cut X$ in expenses by doing XYZ.... Do the work, put it on paper and communicate it to your co-founders, executive team, advisors, and investors. Know this plan will change several times over the coming months as we learn more, and commit to reviewing it weekly and revising every ~2wks for at least the next 3 months. 

- Marc Nager - Partner, Greater Colorado Venture Fund

Get runway well into 2021.

- Celestine Schnugg - General Partner, Boom Capital

Unless you're benefiting directly from the crisis, wait until it subsides before raising.

- Semyon Dukach - Managing Partner, One Way Ventures

Focus on building a great company and investors will follow.

- Brett Brohl - Managing Director, The Syndicate Fund

Work the relationships you already have.  Have a plan B and a plan C.  We’ve seen an uptick in accelerator applications. We’re also seeing accelerator graduates who are applying to a second accelerator to buy time. I think we’ll see more of this.  

- Ethan Austin - Managing Director, Techstars, Western Union

Focus on existing investors, inside rounds, if possible.

- Morris Wheeler - Founder and Principal, Drummond Road Capital

Reset expectations around how much you will raise and the valuation. Have a plan for how to deal with changing economic env. Show how you could get profitable if needed. Show how you do more with less.

- Natty Zola - Partner, Managing Director, Matchstick Ventures, Techstars Boulder

Establish relationships now, even if you aren’t raising. Use this as an opportunity to show how you can weather challenges.

- Jeremy Harkey - Managing Director, Groundswell Ventures

Raise at least 18 months of runway, assume $0 in revenue over the next 3 months, and slow hiring plans. Decisiveness is so important for founders right now.

- Allie Esch - Sr Associate, Dundee Venture Capital

Start talking to your existing investors now to determine capacity and willingness to support an inside round if capital is not available elsewhere.

- Aaron Stachel - Partner, FirstMile Ventures

Raise any way you can from any source you can - VCs, angels, strategics, debt, revenue based financing, grants, SBA loan, etc. 

- John Fein - Managing Partner, Firebrand Ventures

Preserve cash and runway. Be defensive in some areas and offensive in others.

- Brett Jackson - Managing Partner, V1.VC

Make sure to stretch your capital for up to 24 months if needed.

- Rick Moss - Managing Director and Founder, Better Ventures

Take money.  all money.  Offer the best offer first, especially if you don’t have 12 -18 months runway.

- Howard Lindzon - GP, Social Leverage

Be very cost-conscious, talk to your customers, & pad your round if you can.

- Meghan Stevenson-Krausz - Director, INCA Ventures

Other Helpful Advice from Our Network
An Open Letter to Startup Founders Everywhere in a Time of Crisis (Techstars’ David Cohen)

Decision Making in Uncertain Times (Foundry Group’s Seth Levine)

The Playbook for Startup Survival with Steve Blank (Nick Moran’s Full Ratchet Podcast)

Early Stage Tech Funding in the Time of Coronavirus (Grasshopper Capital’s Nisa Amoils)

Free CFO Services from the COVID-19 Finance Assistance Network


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