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The Founder’s Playbook to Raising in a Down Market
Stephen Moore
September 26, 2023
Welcome to EH Weekly, the newsletter from the team behind Medium’s biggest entrepreneur-focused publication.
You can look forward to insightful lessons, practical takeaways and the hottest news stories delivered to your inbox every Tuesday.
In this week’s edition, we discuss:
How to raise in a down market (i.e., right now)
How to develop your post-raise strategy
The Founder’s Playbook to Raising in a Down Market
“Capital raised in 2023 is about to hit a 7-year low, mirroring the grim outlook we’ve seen across mass layoffs, dwindling tech stocks, and slowing economic growth.”
It’s rough out there, but there’s still hope. Joseph Lee just raised an oversubscribed round during this economic downturn. He shared the snippets of advice, tactics and tools he used to create the playbook you need at the beginning of your next funding journey.
Here are some of the best tidbits:
Get ready for rejection — Prepare yourself for the string of rejections and internalize the difficulties of raising during an economic downturn. Investors are dragging their feet, due diligence will be lengthier, and valuations will be lower with less assumption of risk.
Prepare the pitch — Get your tool stack in order to create materials and track progress. From here, finalize your blurb, get your deck handy, create interactive demos and start building your investor contact rolodex.
Request intros — Shoot for warm intros from other founders to cut past the noise, especially when VCs are not in a hurry to deploy capital. Aim for ~100 warm intro requests with an anticipated conversion rate of 60% for double-opt-ins.
Meet and iterate — Once leads arrive, schedule these and push for high density (i.e., bucket meetings together in one week). The density of meetings will create FOMO, drive momentum, and help you close faster.
Due diligence — Continue highlighting how you can be a BIG company (even if your initial product is an initial, smaller wedge) and connect the investor to personal references and customers who will go to bat for you. These references can make or break the investment, so choose them wisely.
Hopefully, by the end of this sequence, you have a term sheet in tow from one of your desired investors. You can then start negotiating terms and looping in follow-up investors to generate velocity for closing.
👉️ Read the full playbook here: A Founder’s Playbook to Raising in a Down Market
So, You’ve Raised Funds — Now What?!
“But what happens when the fundraising frenzy ends? Amidst the never-ending tips for securing cash, a guide for navigating the post-round aftermath is missing.”
If you’re looking to raise, there’s no shortage of advice. But what we really need is a guide to navigate what comes next. Thankfully, evangelist and former YC founder Gillian O’Brien delivered this and then some, including insight from 8 other founders.
Here’s the TL;DR:
Celebrate, but not too much — The best time to take a break is right after the raise. After all, if a vacation kills the business, you haven’t architected it the right way.
Manage expectations — The new fundraise does not mean the company ‘made it’, and founders are responsible for ensuring everyone is on the same page.
Time your press strategically — Press doesn’t lead to sustainable customer growth, but if timed properly, press can provide a nice one-time boost and help substantially with recruiting.
Don’t go overboard on hiring— If you’ve just bagged millions of dollars, it’s tempting to rush out and hire everyone. Slow down. When forecasting your needs, talk to someone who’s seen companies that look like yours scale a team.
Choose exec hires wisely — An exec sets the culture and mobilizes others. This can be disastrous if they aren’t setting the right tone or moving people in the right direction.
Get better at meetings — Your company has to ‘grow up’ a bit. New stakeholders will have higher standards for the way you communicate with them.
Get a grip on your financials — If you’ve been DIY-ing your bookkeeping and accounting, now is the time to graduate to a more sophisticated vendor, not only for your own peace of mind but for your stakeholders.
Switch your mindset — After the raise, get back to basics. Sales mode off, build mode on. Get scrappy, run experiments, put your head down, focus, and take a good look at what’s under the hood.
👉️ Need to develop your post-round strategy? Click here: So, You Raised a Series A — Now What? I Interviewed 8+ Founders to Find Out