Raising money in the time of COVID-19 is a topic that is continuously being updated as the industry responds. The time between pre-seed and series A funding rounds can be a particularly difficult growth period for emerging brands when it comes to attracting more capital. This recent TIG Talk webinar, which covers how to think about approaching fundraising for emerging brands in this stage, originally aired for Nutrition Capital Network applicants for the 2020 cohort. Learn more on how to apply for this pitch opportunity.
With weigh-ins from investors combined with their own industry expertise, Begoun and Dovbish share five takeaways on raising capital over the next 6-9 months.
1. There is still money in the market and ready to be deployed to help brands grow.
“Raising capital is still possible, but under the right deal and premium. If you need the money, don’t be afraid to raise it—just think differently about how to raise," said Elliot Begoun of TIG.
The biggest change lies in not the money itself, but the appetite for uncertainty. Most investors are going to be more cautious currently, which will require some form of uncertainty premium as a part of the terms. One way to ensure that you can raise money confidently in this time is to get intimately familiar with cash flow on a day-to-day, week-to-week basis.
2. Creative non-dilutive capital should be explored first, but equity raises are still happening and possible.
If you are going to raise money, stress-test your models and determine what you need to get through the next 6-9 months. Start with the least impactful first and when you do need to raise equity capital, be creative in the approach to help your investors feel confident.
Explore your opportunities within the CARES Act, non-dilutive forms of capital (debt, PO financing, inventory financing), equity crowdfunding and other creative vehicles first. Put a line of demarcation down on debt—assess how much risk you are willing to take. Be cautious about doing anything that will put you or your family at risk in the long run. Whatever is left at this assessment is the amount of equity capital that you will need to raise in the meantime.
3. Having empathy and preparing for due diligence will go far.
When it comes to uncertainty, any investor investing in startups already had a level of risk—but the amount of uncertainty has increased, and everyone is feeling it.
Build in extra time for investment cycles to help with risk management. Prepare for due diligence by being clear, articulate and confident. This will show a level of empathy for investors, help you lessen this added time and build deeper relationships with your partners. Networking and people are the key to raising money no matter the circumstance. Focus on what you can control, build great relationships and hang in there.
4. Investors are interested in certain categories that are performing well right now, but above all, business acumen and agility shine bright.
Immunity shots, frozen pizzas and any business that is e-commerce enabled are having a moment; however, for many investors two things are extremely important across all categories: showing capital efficiency and reaching your consumer in new and nimble ways.
5. Investors invest in growth hypothesis and the better this is, the more investible your company is—no matter the external circumstance.
If you have clearly defined assumptions and you can show proof that your assumptions are validated, you will weather this interim period much easier. Know your numbers, know your business and prove your model to mitigate risks.
Watch the full talk below.