Communicating with Your Existing & Potential Investors

Takeaways from Our Recent Investor Panel

Recently, we teamed up with the Startup for Startup community, along with our Founding Partner Shuly Galili and fellow investors Jacques Benkoski of USVP and Aaron Jacobson of NEA, to address key questions related to planning and managing fundraising amid the situation in Israel, especially when dealing with US-based or other foreign investors. Among the many insights and perspectives captured in this conversation, the key message for founders looking to raise new capital is that despite the current circumstances, the interest for many established investors in Israeli companies remains unchanged. In addition, founders need to focus on effective crisis management practices to best navigate these turbulent times.

Below are some key takeaways that emerged:

1. First thing’s first: take care of your employees

As we navigate during these times, both as individuals and organizations, it’s essential to recognize that a company’s resilience relies heavily on the morale and motivation of its people, shaped by positive team dynamics. For companies with distributed teams, this challenge may be even more prominent due to the physical distance and differences in how the situation affects day-to-day life and routines. We’ve observed various tactics, including seemingly small gestures that have a significant impact. For example, short videos featuring U.S. employees expressing solidarity with their Israeli counterparts can go a long way.

Keeping communication strong and intentional is crucial not only for effective coordination but also as a signal to investors; it shows that the team is well-equipped to tackle hurdles and work thoughtfully together, especially in early-stage scenarios where conviction heavily relies on the human factor and quality.

2. Evaluate how much capital you need to reach a meaningful first milestone

If you believe your startup is well-prepared for investor discussions — with a committed full-time team, a well-defined vision, and a thorough market analysis — it is an opportune moment. Don’t hesitate to initiate these investor conversations and capitalize on the available opportunities.

As a first-check fund, we observed a notable trend this couple of months. Many founders, both within and outside Israel, have opted for pre-seed rounds instead of pursuing larger seed funding as their first capital injection. If you can formulate a plan centered around a pre-seed round to get your startup off the ground and validate your ideas, we recommend considering this approach. You should still aim to secure a 15–18 month runway at minimum, but finding a more cost-efficient path of operating within your current team’s burn rate is particularly important during this time.

Regardless of your chosen strategy, maintain a realistic outlook on your goals with the available funds and be sure to clearly communicate what the smaller investment will allow you to achieve in the short term — more on this below.

3. Extend your runway to allow for a longer fundraising process

Founders preparing to fundraise, may want to prepare for a longer than usual fundraising timeline. Specifically, founders should consider extending their runway by decreasing burn rate, at least temporarily. Some tactics can include proposing temporary salary reductions or exploring existing programs by the Chief Scientist that offer temporary bridge financing or government support for reservists. For more advanced startups, venture debt might be worth exploring.

4. Qualification is a two-way street

Whether you are already in the process of fundraising or just initiating conversations, it is always important to qualify investors. These days, it is even more crucial, given that some may want to stay on the sidelines for now. It is appropriate for founders to ask probing questions to assess investors’ commitment, intentions, and seriousness in engaging with their startup. A helpful indicator here could be looking at a firm’s track record in Israel: have they recently invested in Israel or are actively exploring local opportunities? Being proactive will enable you to save time by focusing on investors who are committed to investing in Israeli founders.

5. Navigating the discussion with both existing and potential investors

In communicating with investors, prioritize continuity and transparency. It may sound obvious, but both are especially critical during this time period. Be open and clear about the potential impact on your company’s goals, metrics and strategy. A few best practices:

• Avoid downplaying the gravity of the situation. Instead, offer a comprehensive analysis that allows investors to understand the challenges and your strategic approach to overcoming them.
• Communicate with your investors regularly. Provide updates more frequently, and be transparent about the specific risks your company is facing.
• Initiate discussions about any potential impact on your runway (and clearly outline the options you’re exploring to secure additional runway if needed), as well as how you’re addressing challenges such as talent being affected (e.g. called for reserve duty)
• Emphasize the company’s ability to execute and operate normally. Showcase that your startup can seamlessly continue its operations, supporting existing customers and maintaining a sense of business as usual.

6. Keeping personal political views outside the meeting room (and the company’s LinkedIn page)

While we are all operating under extremely distracting, upsetting and emotional circumstances, founders should help maintain a business-oriented presence and avoid potential distractions from the core message of the company:

• Refrain from discussing politics or delving into detailed explanations during boardroom meetings. We strongly recommend founders to steer clear of engaging in political arguments or providing extensive explanations. It’s not only unproductive but also tends to divert attention from the main purpose of the meeting. Focus on your company’s core value proposition and objectives to ensure that your fundraising efforts stay on track.
• Establish a clear policy regarding social media usage, especially on LinkedIn, which was once primarily for business but has seen an influx of political content. To maintain a focused professional image, encourage your team to share political views on their personal accounts, such as Facebook or Instagram, but refrain from doing so on the company’s feed.

7. Management on reserve duty: adapting a pragmatic mindset

Fundraising becomes much more challenging if the CEO is not actively at work. A CEO on reserve duty may still be able to fundraise, but finding time for necessary calls is a crucial consideration — CEOs must realistically assess their availability and capacity to lead those calls and activities.

Additionally, keep in mind that being on reserve duty may make it harder for the team and company to achieve their objectives. One strategic approach is to prepare and train a second-in-command, as investors are now placing more emphasis on team dynamics. They want to understand if the individuals they meet can effectively run the company for an extended period, such as three to six months. It may be highly beneficial for founders to consider and identify a designated CEO in case they are unable to fulfill the role at a given moment. Taking proactive steps ensures a smoother transition if the need arises.

For founders who already have an established board of directors, this includes designating someone to take over the respective founder’s board vote in case action needs to be taken while the individual is away in reserves.

Final thoughts

The last nine weeks have brought about a significant amount of concerns, and uncertainty. However, amidst these challenges, one clear fact remains: many investors, with a longstanding presence, a robust portfolio, and a deep understanding of Israel’s culture and its people, continue to maintain an unwavering interest in investing in Israeli companies.