How to Raise Capital During a Crisis (Because We’re Not Out of the Woods Yet)

In Insights by Rob Shannon

If you’re a start-up founder, you probably spent a lot of the pandemic thinking about how you’ll raise funding.

Or, like the rest of us, you spent a lot more time tuning in to your favourite Netflix series.

Those two things have more in common than you’d think. Very few people know that Netflix was founded during a recession, back in 1997.

The company was founded seven years before Blockbuster reached its peak, in 2004. Originally, Netflix shipped out DVDs in the mail. It should have been a flop.

But today, only one of the 9,000 global Blockbuster stores remain, like a memorial to the much-loved VCR. In contrast, Netflix gained 37 million subscribers as global lockdowns came into place and their streaming service took the market by storm.

While subscriptions to the platform are slowing down (a story for another day), Netflix is living proof that global crises are a stimulus, and not a stopping point, for innovation.

That’s not to say every start-up is going to sail through a crisis. There are a few things you should bear in mind if you want to raise funds while the world’s upside down.

Let’s explore them.

It’s rarely a ‘no’,  often ‘not right now’

It’s true what they say about timing.

Some start-up founders were dealt cruel cards during the pandemic, others enjoyed breathtaking wins. Where travel platforms were grounded, delivery services soared.

It’s part of the reason why investor ‘no’s’ should be taken with a pinch of salt. Investors say no to great start-ups for several reasons – maybe their specialism is MedTech but you’re pitching fintech. Perhaps they want to focus on products instead of service brands.

And then sometimes, a pandemic happens and your travel platform is the furthest thing from investor minds. Even if you’re set to be the next Airbnb.

Until we learn how to predict global crises with incontrovertible accuracy, it’s very hard to mitigate the risk of bad timing.

But here’s the good news: start-up founders are used to mitigating risk. If you’re a founder, it’s probably something you’re doing every day, without even thinking about it.

Figure out what resilience looks like in your industry, and then when it comes to speaking with investors, highlight how you’re building it into your business model. Assess whether your business is actually pandemic proof, or whether you need to wait a little while before pitching it to investors.

Pay attention to current events and market trends, use them to guide how and who you approach. Because timing is critical, but not as important as the next piece of advice.

Generate leads like there’s no tomorrow

Those investor ‘nos’ we mentioned above? You’re gonna hear a lot of them. So many, that you’ll start to think a yes won’t ever happen. Persist.

Your approach to lead generation should feel like a sales role. Unless you’re continuously investing in new connections, the well is going to run dry. Be on the lookout for relationships all the time.

It’s also important to remember that investors have biases. Some of them made their money in MedTech, others FinTech. Maybe they’re not looking for an AgriTech platform to add to their portfolio. Again, this doesn’t mean your idea is naff.

At the same time, you might connect with an investor who loves AgriTech platforms like yours. And then you’ll get an investor and an experienced guide on your side.

A one-and-done approach won’t serve you in the long run. Don’t get too comfortable with a warm lead and forget to nurture other relationships.

Instead, you should be building a steady and reliable network of connections – not just for funding, but for advice and guidance. In these situations, second-time founders or serial entrepreneurs can provide just as much value as a cash injection.

Investor isn’t another word for expert

Don’t fall for the omniscient stereotype.

VCs aren’t always experts in your field. They might have a wider strategic understanding and a good level of industry awareness, but there’s a good chance your niche is new to them.

That’s why everyone tells you communication is key to a good pitch. I’d go one step further and say, it’s not so much communication, as it is storytelling. That’s what helps you land an investment.

Not only do storytelling skills help you harness the power of your team, and convince customers that your product or service is top. They can convince investors outside of your field that they should start investing in it.

It’s all too easy to assume a level of knowledge in the boardroom, but make sure you also give a thorough explanation of your business model. Don’t miss out on curious investors because you chose to communicate in niche industry jargon.

Some investors will be sticking to what they know while global markets are in flux. The best thing you can do to encourage them to branch out is to create a clear and understandable pitch.

Claim the peaks, endure the troughs

The pandemic crisis wasn’t a crisis for start-up funding – far from it. Global venture capital doubled in 2021, compared to the year previous. And most of that capital was invested in the tech industry.

It’s clear to see why. Never before has the world relied so heavily on technology to keep things running. Healthcare systems embraced remote monitoring platforms when they couldn’t see patients face to face. Businesses moved in-person meetings to Zoom, Teams, and Meet. At times, we all took a step away from the overwhelming real world to tune into our favourite Netflix show.

Tech funding is peaking, and you’d do well to make the most of it. If you can position your start-up in a way that speaks to the challenges of tomorrow, and not just today, investors won’t ignore it.

If you want to raise capital during a crisis, you need to be proactive, patient, and thick-skinned. But isn’t that what all great start-up founders should be anyway?

Rob Shannon is the Managing Director of Irish tech recruitment firm Martinsen Mayer, who are specialists in helping venture-backed organisations scale their teams.