11 Ways to Get Your Startups Funded During the Coronavirus Pandemic

The coronavirus pandemic has stalled the startup funding activity to a large extent. The investors are unsure about the market growth in this global crisis.

In such an uncertain scenario, when the world economy is plummeting, it becomes important for startups to evaluate the feasibility of their business idea during and after the pandemic and leverage their businesses by addressing some key issues to turn the unfavorable funding market in their favor.

Startups need to work their fingers to the bone to prove that they can weather up all the ups and downs of the market and have a good understanding of handling their finances.

As per the Q2 2020 global venture report, $129 billion are funded, which is 7 percent down from the first half of 2019. Certain sectors like biotech and healthcare saw a tremendous rise while sectors like hospitality, travel, and real estate observed a sudden dip. 

#1. Evaluate your business plan thoroughly

Investors always do due diligence to assess the potential of the management and the growth capacity of a startup before moving ahead with the funding deal. Now, the norms of due diligence will get even stricter and each prospect will be critically evaluated. 

Thus, startups need to examine each section of their business plan and update it as per the requirements of the current market situation. 

Founders who would be confident about the viability and growth of their business will have better chances of grabbing the deal

#2. Prepare a well-documented succession plan 

A succession plan is often the most ignored component of a pitching presentation, but it is a strong indicator that you are really passionate about your startup and have taken all the necessary steps to prevent your company from falling into the trap of failure.

A formal succession plan helps the future buyer to learn the ropes before they take over your company and allows you to smoothly shift the power in other hands.

#3. Monitor your cash burn minutely 

Review your cash flow forecasts in detail for the next 12 months and take immediate steps to mitigate unnecessary expenditures to preserve cash.  

Most of the VC investors have indicated to their portfolio companies to prepare themselves with the liquidity for 18-24 months. If a startup has a good hold over the cash burn mechanics, it acts as a brownie point for them. 

As most of the industry sectors are underwater, it is crucial for startups to assess the commercial viability of their product/service and their competitive advantage over their competitors. 

Adopt a customer-centric approach and do thorough research to know the problems your customers are facing in these unsure times., 

Investors prefer companies who knows how to maintain their competitive advantage and have the potential to not only survive but also thrive during the market slowdown

#4. Consider pivoting your value proposition

As most of the industry sectors are underwater, it is crucial for startups to assess the commercial viability of their product/service and their competitive advantage over their competitors. 

Adopt a customer-centric approach and do thorough research to know the problems your customers are facing in these unsure times and what you could do to make their lives easier.

Investors prefer companies who knows how to maintain their competitive advantage and have the potential to not only survive but also thrive during the market slowdown

#5. Enhance your product portfolio

Everything filters down to profitability when it comes to funding. With a major dip in the purchasing power of the customers, companies need to venture to out into diverse market categories with different products and services to again better traction.

You need to identify the evolving needs of the market and allocate your resources to the improvement and rebranding of your products in the emerging promising markets. Many startups are now going online to preserve their existing customers and to acquire new ones.

#6. Pick your investor wisely

Just as investors spend a lot of time assessing you and your startup, likewise you too need to do the due diligence at your level to know your investor well. 

Try to dig deep to know the investor’s vision for your company and how it is different from your vision. Once the investor is done with their questions about your startup, you should definitely talk to your investor about their role and involvement in your company.

This would lay the foundation of a transparent relationship between you and your investor.

Also, do your homework to figure out the expertise and the network connections of your investor beforehand. Investors who understand your industry and have wide networks would act as a mentor in the testing times and add value to the growth of your company

#7. Get a grip over technology

Now, when everyone is working remotely, let not lack of face to face meetings cause a hindrance in your funding pitches. Connect with the investors over video conferencing through Skype, or Google Meet. 

Get your hand on its features like screen sharing, virtual backgrounds, and scheduling meetings to conduct smooth and productive sessions with the investors. 

#8. Strengthen your team

Team quality is one of the major factors in which the investors are interested as it is the motivation and the passion of the team that keeps the startup afloat during the tough times.

Given a large number of layoffs in the past few months, it is now a wonderful opportunity for startups to expand their team with talented people within their budget. 

Explore your global connections and let geographical distances not come in between your startup and talent with virtual meetings and conferences. 

#9. Downsize your funding amount

If we take references from the 2008 global crisis, CB INSIGHTS reported that only 48 percent of the companies who secured seed funding before the commencement of the crisis could raise funding in the second round and 30 percent of the companies decided to exit either through an IPO or M&A and 67 percent became self-sustaining or dead. 

This trend is relevant in the present crisis too, making it is crucial for the startups to reevaluate their funding capital requirements by pinpointing the priority costs and cutting corners on dispensable costs so that you can schedule the second round around the time of economic recovery.

#10. Optimize your valuation

Regulation of valuation in the times of economic crisis will save you from the undue pressure of meeting the unrealistic growth goals to reach the expected valuation 

High valuations decrease ROI for invested capital, which is not beneficial from the investor’s perspective in this economic slump. Typically, investors look forward to a 2-3 x increase in valuation in every round, but very high valuations bring down the markup to 50 percent to 100 percent with each round. 

Therefore, startups need to adjust their valuation with the current economic situation to attract investors.

#11. Turn your industry pains into gains

Coronavirus has hit many industries quite hard. There are facing terrible low conversion. The World Travel and Tourism Council forecasts a global loss of $2.1 million and 75 million jobs if the pandemic continues for a few months more. 

Those who will adapt to the changes and reinvent themselves in this dynamic market situation will emerge as winners. Travel companies are planning to offer 3-D virtual tours, phygital tours, a blend of physical presence and digital experience, and more. 

Covid-19 has topsy-turvy the whole market scenario, but such situations are the opportunities for innovation and reinvention. Startups need to adopt an agile and flexible approach to adapt to the dynamics of the market.

Fundraising may have become even more nerve-wracking but your passion, resilience, and willingness to optimize your startup as per the present situation will definitely lead you to successful fundraising.