the past couple For years it was all about massive valuations and less about demonstrating maximum operational efficiency across the company. Even if you haven’t experienced this first-hand as a startup founder or employee, the sheer amount of funding that was spread out last year proves my point.
This year it is a little different. Largely as a result of continued high inflation, round sizes and valuations are beginning to fall – or normalize.
As a CEO who successfully raised capital in Q4 last year and is now actively raising another round, I want to share my observations and tactical tips with other founders looking to fundraise in today’s volatile market.
What investors aren’t interested in?
To give you an idea of the size of my data sample, I met about 60 investors to pick up both my seed and Series A rounds. About 95% of those investors were based here in the US (mostly in Silicon Valley), and they came from a combination of private equity, investment banks, and growing VC firms.
Based on my conversations, here are three things I noticed investors are not now interested in:
Investors are currently very fond of safety and security products, life-saving drugs and cheap consumables as these are essential products and services.
Financing Startup Trends
Lately I have found that most investors are looking for reasons not to invest. Common feedback for founders is “Your churn is too high”; “You have too much sales concentration from a single customer”; and/or “Your product has potential future regulatory risks.”
Companies with high capital expenditures
If you run a capital-intensive business or travel long distances while having negative EBIT, it can be difficult to find a willing investor. This is a terrible time to show a great loss in short-term operations.
Supporting new companies
VCs are now more likely to continue investing in their portfolio companies.
What investors are interested in?
Don’t panic, VCs to be interested to invest in now, just in a few areas.