Fundraising During COVID? 3 Essential Slides to Add to VC Pitches
The newest question founders can be assured will come up when pitching VCs during fundraising is, “So how has COVID impacted your startup?” This deceptively simple question is surprisingly hard to answer, but it will come up again and again.
If you are currently fundraising, you should have slides in your pitch deck dedicated to answering this question. In a recent video, Urbantech Managing Director Andrew Ackerman gave his advice on what pieces of information these slides should contain.
Slide 1: Is the “new normal” better, worse, or the same for your startup?
Startups are often on the cutting edge of emerging trends, and one of the key challenges in closing sales is finding customers who are most open to embracing, rather than fighting, these trends. In a post-COVID world, many potential customers have no choice but to seek out new technologies to solve the needs of remote workforces, to improve efficiencies and cut costs, and to establish new competitive advantages.
In healthcare, for example, health systems have been wary of telehealth solutions for privacy reasons, integration issues, billing issues, and other operational reasons. Traditional face to face medicine was working well enough, so they put telehealth solutions on the back burner as something to “figure it out later.”
COVID turned that upside down. Telehealth is now non-negotiable, and physicians are making it work. Consumers have adapted to this new normal, and the market for virtual care tools will likely grow at a much more rapid pace.
What does this mean for a startup pitching a product in this sector? Founders can include data about higher adoption and utilization rates, increase TAM calculations, discuss the second-order effects of increased telehealth, and many other more specific ways that this trend can provide a tailwind for the startup.
Slide #2: What do you need to do to make it to the new normal?
Long term tailwinds are useless unless you can survive long enough for them to kick in. Unless you are one of the rare startups that is directly fighting COVID, it’s likely to be a slow time for growth.
If you’re fundraising, you must convince VCs that you are raising capital and can goal should be to get to at least 12 months of runway. But if possible, you raise enough for 18 to 24 months of runway. Based on previous financial crises, fundraising this year (i.e. in the beginning of the crisis) will be much easier than fundraising next year (i.e. when venture funding could possibly experience a slowdown as new capital slows).
For this slide, you need to be intimately familiar with your cash burn in good, moderate, and bad scenarios, and you should have a plan for each of these situations to present to investors. In our recent conversation with Bullpen Capital VC Paul Martino, he gave some advice on this topic:
This means having multiple plans for different scenarios to present to investors. No one knows how the crisis will shake out, so founders need to have a plan for good, moderate, and potentially terrible economic scenarios. Martino mentioned one of his portfolio companies who presented 6 plans for different scenarios.
Other points to include in this slide of your pitch deck:
- How has your startup utilized the PPP loan program?
- How do you plan to cut your burn rate? In a worst-case scenario, you’ll need to think about furloughs for current employees, scaling back hiring, reducing marketing budget or adjusting to higher ROI activities, or other methods.
- How you plan to raise more money if necessary? If you are pitching new investors, you can discuss contingency plans to secure backup funding from existing investors if the recession worsens.
Slide #3: In the near term, can you make lemonade from lemons?
“You don’t have to just batten down the hatches and wait for the storm to blow over. There are often opportunities buried in crises and you have to look for them,” states Andrew Ackerman.
For example, Kognition uses image recognition to make sure that the person swiping into the building is who he or she says they are. They can connect to any IP camera, even a thermal camera. But pre-COVID, no one cared about thermal cameras. Post-COVID, Kognition offers a limited use version of their software to screen tenants and delivery and service people for elevated temperatures for free.
Another one of our real estate tech portfolio companies, eDraw, helps lenders process construction loans, all online and in one place, replacing in-person paper-based processes with online workflows that are 75% more efficient. So eDraw is offering their software to lenders for free for the duration of the pandemic knowing that, once they have a taste of what eDraw can do, they’ll never go back to the hodgepodge of emails, faxes, and spreadsheets they currently use.
The takeaway for this slide: Look at your current capabilities to see if there is some feature that previously was fairly minor that might now be very relevant. Look at your dev pipeline to see which features you might want to prioritize in response to the crisis. Even if you misjudge the situation and the market doesn’t respond as anticipated, you are still moving in the right direction in the long term.
If your potential customers are cash-constrained, offer the service to them for free to get them hooked. Maybe your customers are considering several options, and this is a great way for you to become the incumbent when the time comes to start charging again.
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