Takeaways from a Conversation on Early Stage Fundraising in the Current Climate

Written By Heidi Burns Hilton

This week we chatted with Natalie Dillon from Maveron and Andy McLoughlin from Uncork Capital about early stage fundraising during these unprecedented times. It was a fun discussion where we gained insight from three unique early stage venture capital funds who are focused on investing in both consumer and enterprise startups. Here are some of the takeaways:

Helping Portfolio Companies Navigate

Once the pandemic hit many funds took a step back from sourcing and investing to really jump in and help their portfolios navigate these uncharted territories. Whether it was helping to manage budgets or restructuring the team to researching and applying for the PPP loan, funds of all sizes (especially early stage funds) stepped in to support their companies with some extra hand holding over the past few months. Here are a few tips from Signia VC, Maveron and Uncork Capital:

• Be careful on how you manage cash: have enough cash through 2020
• If you make layoffs, make them quick: this will help with company culture and morale
• Emotional support for companies and their employees: bring in resources to help your portfolio companies such as Diversity + Inclusion leads
• Assist with preemptive fundraising: help your companies do this in a thoughtful way and hone in on positive benefits that have occurred due to COVID
• Recruit A-players: use the current lay-offs from great companies to find amazing individuals for your team

Fundraising and Investing in the Current Climate

Many of the newer funds have not seen anything like what is happening in our world from an investment perspective. In fact, the majority of smaller seed stage funds were started only in the last 12 years, all of which have been in an upmarket. Fortunately many of these funds have investors who were former operators with the experience of fundraising during a recession, including the speakers on the panel. Here are a few tips:

• This pandemic is affecting EVERYBODY
• The current climate is radically different from any recession investors have seen before
• Have supportive investors who will help lead you into your Series A and beyond
• There is optimism from many investors that new ideas and startups will pop up soon

How Early Stage Funds are Sourcing

Natalie, Andy, and Sunny discussed how early stage investors must be very creative when sourcing deals because smaller seed funds do not have all of the resources that large funds have. However, with a lot of research and relationship management you can gain access to more (and better) deal flow. Here are a few tips:

• Seed funds can be very collaborative especially if you love the funds you’re working with
• Building a great network of founders or execs who you have worked with before is key
• Make your investment thesis known, so people know investors will keep you top of mind
• It takes a while to build a good reputation as an investor, but it takes one thing to ruin it
• Be kind, be transparent, be honest and founders will want to work with you!

In COVID Times

Here are a few tips:

• Your online presence now matters more: Put out meaningful content
• VCs are hiring a more geographically dispersed team since travel is limited
• Build relationships with other investors right now and prove you can be a great partner
• Investors are looking at companies with more scrutiny and being more conservative
• Deals are taking a bit longer to get done because investors are doing heavier diligence

We love hosting these open conversations with investors and hope you learned a few good pieces of advice for fundraising (and investing) during the current climate and beyond. Visit our twitter @SigniaVC to see a video clip of the webinar.