Staying positive: Securing investment during a pandemic
Although almost all businesses have been hit hard by the coronavirus pandemic, early-stage startups are seeing the worst of it. Early startups depend a lot on investments as they get off the ground. With the pandemic raging, investment funds are not flowing as they used to, and this has left a lot of early startups in a difficult place. They are increasingly finding themselves in a position where they need to innovate and find new investors, or they will likely go out of business. The good news is that there are investors who are still willing to invest in startups that can do the work to adapt to these new circumstances.
Adapting to the pandemic
Staying flexible remains one of the best ways for small companies and startups to ride the wave and come out on the other side. Flexibility, in this context, means having the ability to alter the way you do business to stay competitive in a shrinking market. It also means keeping an open mind when negotiating investment opportunities, so you do not push too much and miss certain opportunities.
Adapting to the pandemic has also necessitated that startup founders look at their business models and decide if those models will keep working in a world that is constantly changing. Lastly, startup founders have to look at the markets they are in and try to balance supply and demand, all while thinking about speeding up or slowing down manufacturing and distribution to keep this equilibrium.
The ability to adapt and remain flexible are just two of the many things investors are looking at, as they will dictate whether a business makes it through this pandemic.
Institutional investors are still active
A major fallacy during this pandemic is that institutional investors have stopped investing. It is important to remember that these types of investors usually have their own investors who still need to see a return on their investments. Even though investments from institutional investors have slowed down, they are still available for startups that know how to get them.
Physical travel is making it harder to meet and negotiate with investors face to face, but technology has rendered this point moot, as it is now possible to meet investors from all over the world right from where you are. Technology is making it possible for startup founders to reach out to potential investors to establish relationships and see if these investors are interested in investing in their companies.
Keeping the startup going
Investors want to know they are investing in startups that are still going. The best way to demonstrate this is by keeping your team intact. Fragility is very dangerous when looking for investments because investors wonder why people are leaving the company on one hand while you try to convince them the startup is standing on solid ground on the other.
Another way to keep a startup going is by hiring the right people to make sure it does. Hiring might not seem like the right thing to do in these circumstances, but hiring the right people is the best way to go about things. The hires you make will play an important role in not only ensuring the success of your startup but also have a huge impact on your startup's success.
When hiring during the pandemic, it is important that you get your timing right. Good timing gives you the benefit of getting the right people who might have been let go but who will provide tremendous value to your business. Hiring at the right time also means you get to create a formidable team that will help your startup have the most market impact without decimating your profits.
What is your value proposition?
Due to the prevailing uncertainty, investors are looking to fund startups that have genuine and compelling service and product value propositions. It is, therefore, vital for startups looking for investments to focus on providing this value and to ensure that it is special and can be conveyed in as few words as possible.
If your business already provides a unique product or services, or even one that already stands out on its own, it is already infinitely easier for you to convince investors to invest in your startup.
Have a contingency plan
Investors are looking for businesses that can demonstrate they can cope with the pandemic and all the effects it is having on businesses. The best way for you to do this is to have a contingency plan in place. Having such a plan in place also helps investors see that you are taking steps to minimise their risk, which is always a plus. In formulating a contingency, start by adjusting your projections. These include things like sales and revenue projections. This will give you a realistic picture of how the pandemic will affect your business.
You also need to adjust your projections on expanding and investing in new areas yourself. By doing this, you will be demonstrating you are working on keeping your funds consolidated so that these funds can be directed at helping the startup get through the pandemic.
It is also a good idea to look at other ways you can keep the business going. For example, applying for grant extensions and looking at business interruption loans are all good ways of showing investors you are proactive in trying to ensure your startup survives the pandemic.
Understand your challenges
Every startup is different, which means every startup will have its unique set of challenges to deal with. Investments and cash flow are an obvious problem right now and although it is always a good idea to sort these out first, other challenges might come up that need to be addressed. These might include supply chain problems, an inability to work or collaborate with other startups, or even getting the right advice when looking for funding.
With everything slowing down, you might need to come up with creative solutions to your challenges. Technology is the obvious solution for most things, including getting your startup known, marketing it, reaching new customers and investors as well as solving supply chain issues by finding new manufacturers, suppliers, and distributors.
Finding solutions to the challenges your startup faces reduces friction inside and outside the startup and investors love seeing this. The less friction there is, the sooner you can put their money to work, and the faster they can see a return on their investment.
Get help when you need it
Getting funding is always difficult even in perfect conditions. In these challenging times, getting advice and help from partners and firms that can help you secure investment for startups will benefit your startup massively. Look for accountants and law firms that specialise in offering advice to businesses that are actively looking for funding, and act specifically on behalf of startups. That way, you can be sure that they know the lay of the land in detail and will have seen your current challenges before and know exactly how to help you address them
Position your business better
No one wants to change how their business operates, especially when it is just starting out, but that might be necessitated by the fact there are signs that are giving investors an idea of which businesses will survive the pandemic. The businesses that are most likely to survive are the ones that will receive funding. These are businesses that embrace remote work wholly or partially, businesses that are into e-commerce, and those that require virtual actions over physical actions.
If you would like to make some changes, there are two ways to go about it; you could either figure out a new direction to take your business or take advantage of some temporary opportunity that necessitates your business makes these changes.
When making these changes, you have to make them with an in-depth understanding of how user and consumer behaviour has changed. For example, if you are in the e-commerce space, you need to demonstrate to investors that you understand the prevailing market and how consumers interact with it right now. These two things are vastly different from what they were a year ago, and having this insight will give you a huge advantage.
Everything we have discussed above has centred on how to get your startup through a single wave of the pandemic. Investors need to see that you are making the necessary changes to deal with a second or even third wave in the markets you are in. As discussed above, understanding the new market in the context of a second or even third wave will give your startup the best chance of survival. It will also be easier to get investors on your side if they know you are ready for anything else that might come your way. If prevailing circumstances push you to hire or change the way you do business, adapting, and remaining flexible will be key.
Grace Murphy, Content Writer, http://newsandreviewsguru.com/