So 2023 is a unique time in venture fundraising.  We’re coming off a stretch in 2021 where VC capital hit crazy, record highs… and now is coming into multi-year lows.  It’s a time when SaaS and Cloud spend are also at record highs, and many Cloud leaders are still growing at strong rates … yet many startups have stopped growing at all.

And really worst of all is multiples.  What public (and private) SaaS companies are valued at as a multiple of revenue.  They are at some of the lowest points of the past 7-8 years.  And low multiples make fundraising hard.  It hit late-stage first, because it’s hard to do high-valuation late-stage deals when the company would likely be worth less if it IPO’d today.  Then it hit Series B and C.  It hit Series A last year.  And now, it’s finally hitting Seed.  Seed is slowing down last, but it is slowing down.  Especially as Seed VCs are getting more and more nervous that no one is going to write the next check anymore.

You can see here multiples are touching the lows of early 2016 and are even lower than 2015 and those early days of SaaS.  That’s … low:

And one problem I see is too many founders using a dated playbook for venture fundraising.

Let me just share 10 Simple Suggestions on How to Make Fundraising a Smidge More Successful in 2023:

#1.  Don’t Set Super Tight Deadlines If They Aren’t Real.  Stop telling VCs they have a week to decide, if you can’t 100% back it up.  Have 2 offers in hand?  For sure, be aggressive.  You almost have to, to be respectful to those 2 offers.  But don’t play timing games.  Folks will just walk.

#2.  Don’t Hide Mediocre Growth or That You’re Running Out of Money.  You probably are unfundable if growth has slowed or is nonexistent, and yes, it’s stressful to have only a few months of runway.  But hiding both doesn’t help.

#3. Cold outreach and email does work but please, please slow it down and make it great.  Truly hyper-personalize it.  Reference other great investments they’ve made, and why they are similar.  Share lots of details.  Generic cold outreach will fail.

#4.  Don’t fudge the financials.  Don’t count deals that haven’t closed as revenue.  Don’t combine two months into one.  Don’t use “quarterly MRR” or other weird metrics.  Yes, fudged financials may help you get a first meeting.  But especially these days, they will blow up on your when they don’t tick and tie and make sense.

#5.  Address big structural issues up front, especially if you’ve already raised too much money.  VCs would overlook startups that had raised too much money in the Go-Go days, or had lots of founder turmoil, or lots of churn, if the growth was there.  Not so much today.  If there’s a big issue, just address it upfront.  “I know we’ve raised $5m already and that was a bit too much, but we’re hyper-efficient today and going to triple this year.”  That addresses it.

#6. Give VCs enough time to see another card.  The simplest way to do this is if this month is going to be strong, send the VCs a prompt update on the last day of the month.  Another month of progress, another set of new customers, etc.  This always builds confidence.  VCs are always worried things will slow the day after the money goes into the bank.  Show the opposite.  More here.

My #1 Best Hack for VC Fundraising

#7.  “And Then We’ll Raise a Huge Series A Later This Year!”  Don’t talk about how you plan to raise an even bigger round in 6-12 months. Maybe you will, and hooray!  But the markets are so tight today in venture.  No one wants to take a bet that this is just enough money to get you to a mythical round in a few months that probably won’t remotely come on that schedule.

#8.  There is No Pass for Slower Growth These Days.  Yes, macro issues are impacting many.  But that’s not VCs’ problem.  If growth has slowed, you may not be fundable.  Be honest and aware of it.

#9.  Consider Asking for The Least Amount of Capital That Works.  If you ask for say, $2.5m in the round instead of $4m, you may be able to attract investors that are OK with the risk in the former but not the latter.  Yes, a lower ask also sort of implies a lower valuation.  But it also helps you get the deal done.   For me, for example, a $4m check just has to work.  It just has to.  But a $1.5m check?  It’s OK if it doesn’t work out.  Not great, but OK.

#10.  Be Transparent.  Well, At Least Be 90% Transparent.  Share more data, not less.  Share customer testimonials.  Share why you lost a big deal.  Share where the competition is stronger, for real.  Share up front why your first CTO left.  Transparency builds trust.  A lot of folks run aggressive playbooks and deal processes in 2021 with limited disclosure and lots of FOMO games.  Well, there’s just not that much FOMO today in SaaS, at least.  And no one is in a rush today to invest.

(money sticker from here)



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