No matter the stage your company is in, raising growth funding is stressful, unpredictable and enormously distracting from actually running the business. And it’s become even worse in the last nine months as the turbulent global economy leaves the public and private markets struggling for air.
I faced a similar situation in late 2021. I was about six months away from starting the fundraising process for my company’s Series B when it became clear that the global economy was rapidly deteriorating, and I needed to reassess the timing of the next round.
Here are some of the steps my team and I took to analyze the situation and close a successful Series B:
The difference a year makes
My company raised a Series A in November 2020, just as investments in cloud computing and digital transformation initiatives were accelerating. About a year later, it was becoming obvious that the market was turning.
Timing the market is impossible, but as much as you can, you should raise money when your numbers are great.
The initial signs were the significant drops in public company valuations, with some previous high flyers losing 60%-70% of their value. It was unclear how much this would impact VC investments, as many of the top firms were, and are still, holding significant dry powder on their books.
However, we assumed that VCs would not be able to source as many new deals as earlier so they could pay more attention to and reinvest in their existing portfolio companies. This assumption was validated when a preemptive offer was pulled only a week into my funding process.
The decision process
While it is important to get input from trusted sources, you must ultimately decide when to raise capital based on all available data and your instincts and experience as an entrepreneur. You must factor in and analyze the performance of your company through an optimistic but realistic lens.