DON’T JUST BE DEMAND, GENERATE SUPPLY
It’s remarkable how much money was invested in Brazilian startups during 2021. While in 2020 the VC market invested USD 3.5B in total, in 2021 this number tripled, reaching USD 9.4B.
Some could argue that the majority of this money was invested in some of the 10 brand-new Brazilian unicorns. Fair enough. They did bring a lot of capital. However, what nobody can disagree with is that there is an unprecedented supply of money coming in.
But the paradox here is that I notice many early-stage entrepreneurs still struggling to get their first round. I can’t help but wonder if that’s yet another income distribution problem happening — something we’re quite used to — or maybe something else.
Instead of assuming the worst, I personally try to believe that this is a supply and demand problem. And this gives us more energy to find possible solutions and turn things around. Let me explain:
I believe we currently have more VC money available than Startups are able to raise it. Don’t get me wrong, I’m not saying we’re lacking good entrepreneurs. Quite the contrary. There are many amazing companies popping up everywhere. But it seems we’re in a bit of a paradox, where businesses need money to grow but also need to grow to raise money.
In other words, there seems to be more supply of money to Series A, B and C than to early-stage rounds. I can also assure you that the competition in the early stages is much fiercer too. Not a great situation. There are many more startups fighting for the small seed rounds on the demand side of things.
Sounds grim, no? But listen, you can create a plot twist.
Tip #5 DON’T JUST BE DEMAND, GENERATE SUPPLY
You need to flip the switch, think like a salesperson and invert the equation. In other words, you need to supply a great opportunity for hungry investors.
First and foremost, be as ready as possible for the next round.
Secondly, be proactive. Create your internal “investor pipeline”. There is certainly money out there ready to fund your business.
Lastly, stop asking for money. Counterintuitive, right? What I mean is this: start asking for advice instead. That will be much more helpful to understand the actual needs of your prospects.
Imagine VCs as your most valued client, someone you’re trying your best to bring value to. Of course, you need to think of your needs too. But the goal here is to change the game and have better chances of closing a deal, right?
See you next time!