How to raise capital in a tough funding market

Mind your own business

The best start-ups have a deep understanding of the problem they are looking to solve and how they are uniquely placed to solve it. To quote Jeff Bezos, it’s important to remember to focus on what makes the beer taste better and not get caught up on trying to build an in-house solution to every problem you face. While capital efficiency is a priority more than ever, it’s important to put a value on your teams’ time and not waste it on non-core tasks that can be outsourced.

Adapt to survive

Companies that have thrived in the past few years are generally those that embraced adaptability. Investors are looking for teams that can show resilience in the face of adversity and embrace uncertainty. Founders and management teams should have a deep understanding of the risks faced by their business and the broader market that they operate in.

Invest in people

You will often hear early-stage investors talk about the fact that they invest in people – after all, the best-laid plans aren’t worth anything unless you have the people to execute on them. Very few founders possess all the skills they need to execute on their business strategy, so it’s important to think about the balance of skills and experience in your management team. A well-oiled management team with the right balance of skills will generally beat a team of MVPs who can’t work together.

It’s not (always) just about money

When speaking with potential investors, take the time to understand what value (besides their cheque) they can add. Can your next investor help you expand overseas or open doors to new markets, provide access to resources, or become a valuable customer? Look for capital partners who bring more than just money to the table.

Transparency is key

Trust is a currency that is slowly earned and quickly lost. Be transparent about your challenges and how you plan to overcome them. Good investors appreciate honesty and a realistic assessment of the road ahead.

Show, don’t just tell

In a risk-averse market, delivering on what you said you would do, is invaluable. Many investors will spend months getting to know their potential investee companies, tracking their performance, having regular check-ins with management, and ultimately seeing if they are able to deliver on their promises. Understanding the metrics by which your investors will measure you, setting a road map with clear milestones, and being clear and honest about your past performance is key to demonstrating your ability to deliver and helping your investors build conviction in you and your business.

Navigating the new normal

Tougher, more volatile market conditions are likely to be the new norm for the foreseeable future, but as the old saying goes, volatility creates opportunity. Early-stage founders and management teams need to be proactive, rather than reactive; strategic rather than hopeful. These sorts of market conditions will favour those who can see beyond the horizon and who have the agility, resources and conviction to move quickly when new opportunities appear.

Xavier Keary is a special counsel at Gilbert + Tobin and Head of G+T Ventures, G+T’s specialist company-side venture capital practice.