A guide to funding success as we emerge from lockdown
By Crowdcube. 3rd Jun 2020
Like many other entrepreneurs, I’ve learnt a huge amount in recent months about fundraising and running a business during a lockdown. Many of the lessons I’ve learnt aren’t unique to a global health pandemic; some apply to any financial crisis or recession.
As we emerge from lockdown, it seems increasingly prudent for entrepreneurs to accelerate fundraising plans over the next six month given the real threat that Covid-19 have an impact for the coming months. So, whether you’re looking to fundraise right now, next month or in the autumn these are my key takeaways to help ensure you achieve your funding goals.
Difficult situations, like Covid-19, bring out the best in good entrepreneurs; they are brave, decisive and inspire the people around them to focus on the challenges and opportunities a crisis creates. This is a great chance to prove to existing shareholders and potential new investors your passion, resilience and determination to make your business successful, whatever the world throws at you. Handled correctly, situations like this will help foster lasting trust and confidence from your shareholders, employees, customers and wider community.
Tip: Make sure you are proactive and purposeful in your communication with your community - from your team and existing shareholders, to your customers and potential new investors.
The consequences of this lockdown, more than any other recession in history, has demanded businesses to think about pivoting from growth plans to survival strategies. By now, every business owner, large or small, will have implemented their plans, which should be constantly reviewed and adjusted to react to this rapidly changing situation.
This presents a great opportunity to explain to investors how Covid-19 has impacted your business and how you’re successfully navigating the crisis. You should spell out the measures you’ve implemented to minimise disruption and mitigate risk, as well as outlining the actions you’ve taken to capitalise on any opportunities.
Tip: Be transparent with investors about the impact of Covid-19 on your business and reassure them what you’ve done to navigate the crisis safely.
Crises are inevitable and sometimes unforeseen; they are also great opportunities. For me, the best businesses are not only aiming to survive right now but are planning to emerge stronger than their competitors, and even thinking about how they can thrive during difficult times. It is potentially a great chance to show investors how you turned a potential disaster into something positive for your business. Many businesses have accelerated existing product roadmaps or created completely new products, which may potentially make your business more appealing to investors. Entrepreneurs should consider how they can demonstrate how they’ve stolen a march on their competitors and are well-positioned to capitalise on the bounce back.
Take the hundreds of restaurants that have started offering takeaways; or fitness club, 1Rebel, which now helps its customers’ workout from home with RebelTV; and consumer goods and food & beverage businesses like Wild Beer and Crate Brewery, which are now selling directly to their customers via websites, rather than relying on retail outlets. These new products or channels to market may have been born out of necessity, but they may create new markets and revenue streams that continue in a post-Covid-19 world. A word of caution, don’t trade too heavily off Covid-19, be sensitive about it and how the business may benefit from the situation.
Tip: Tell investors how Covid-19 has made your business stronger.
Don’t lose sight of your purpose, mission and vision; most investors take a five to 10-year view of the world, not a short term one. When pitching for investment you should emphasise your purpose - why you started your company - and reassure potential investors about your long term vision and how you want to leave your mark on the world. Your vision should still have the capacity to inspire investors, even during these difficult times. If helpful, think about how you can reframe your mission for investors in light of Covid-19 and show them how your business is more important than ever.
Tip: Focus on your long term vision.
You should explore all funding options available to you. Don’t forget the power of existing EIS tax relief, which is proving to be increasingly important for investors seeking to reduce heightened levels of risk during these challenging times. The UK Government, like others around the world, has also stepped in with new funding initiatives to help businesses through the economic fallout from Covid-19. Whether it's the Future Fund, Bounce Bank Loans, CBILS loans, or Innovate UK grants here in the UK, you should explore and keep all options open.
However, you need to be pragmatic. Take the time to fully understand the pros and cons of each source of help. It’s also worth recognising that your existing shareholders, and the people who believe in your business, will probably remain your best source of raising any meaningful amount of investment; so make sure you talk to them about how important EIS tax relief is to their investment decision.
Start with existing shareholders, then cast your net further afield by talking to the people who care about your businesses and the mission you’re on. Talking to your team, personal network, and avid customers are all good starting points for who you should approach. But before you do, make sure you are well prepared to demonstrate to insight #1, #2, #3 and #4. Like all good sales pitches, make sure you plan your approach, focus on building a strong relationship and have a sharp elevator pitch. Be realistic with your valuation and mindful that you may need to be sympathetic to increased risk following this turmoil from an investors perspective.
Tip: Raising investment may take longer at the moment, so start sooner and make sure you have a razor-sharp investment deck before you start pitching for investment. Begin with existing shareholders first and get feedback all the time.
One thing that’s stood out to me more than anything during this crisis is how people rally around things they love. Whether that’s friends and family, the NHS, a local independent retailer or businesses that they believe in.
Covid-19 has highlighted the resilience of some brands with a strong sense of purpose. People are seeking out their products, using their services more and urging others to do the same during these challenging times; this is no accident, these forward-thinking businesses have put their customers and broader community at the heart of what they do for years. Now their customers are repaying them with loyalty and advocacy that is priceless at the moment.
We’ve seen first-hand at Crowdcube how a business’s community takes on superpowers. Since the beginning of March we’ve completed 60 successful raises for startups like Pawprint and Clim8, which have galvanised their fledgeling customer bases and Freetrade, which has nurtured their community from their launch in 2016, raising £7m from over 8,000 people in just a few days.
Tip: Approach the people who believe in your business the most about investing.
Whether you are in the midst of fundraising right now or planning to raise in the coming months, these six key takeaways should help ensure you raise the money you need.