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Fundraising During A Pandemic? 4 Ways For Startups To Be Most Effective

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The fundamentals of pitching a startup during a pandemic are no different than pitching in normal times. In fact, there is a strong argument for looking at the crisis as an opportunity to start something. Regardless, there are elements of both substance and style that will meaningfully strengthen your call for investment, here are the four main ones.

1) Runway aka Show You Can Go Longer — At Tau we focus on seed, especially “mature seed”, where a company is 9-18 months away from series A aka product-market fit. With the pandemic our view is that many things are already delayed and unlikely we can recover the time lost. In fact our belief is things will continue being delayed until there is a vaccine or true herd immunity, neither of which we see as happening first least a year. As such we are focusing on startups having enough cash to last them ideally for 24 months — something we have heard from many other funds. Practical suggestion — if pitching today your position will be stronger if you can show a longer runway than in normal times, whether it is by lowering burn, generating earlier revenues, or simply raising more capital.

2) Early Diligence aka Engender Trust And Interest Quicker — If you and the investor already know each other well then skip this section. But if you don’t it’s in your interest to establish trust and interest quicker, usually by sharing more information upfront. At Tau our deal flow has actually doubled because of so many startups reaching out. We are not compromising on deep diligence but for early diligence, i.e., for filtering startups we have made the trade-off of setting a slightly higher bar. That is the widespread norm among VCs during the pandemic. Practical suggestion — decide there is enough mutual interest and no conflicts of interest in your first call and go ahead on sharing your data room thereafter.

3) Deep Diligence aka Steer It Stronger — This is good practice at any time but especially right now. The investor has a question around market size? Send them some data. The investor has a concern around a contract? See if it makes sense to connect them to the customer directly. The investor needs reassurance around the team? Get your cofounders or other key members on at least one call. There is definitely something to be said about the momentum of a deal and it’s a U-curve, too little and your deal won’t generate enough conviction, too much and your investors might give in to doubt rather than possibility. So steering the diligence more strongly than in normal times is in your favor.

4) Communication aka Choose Your Medium Wisely — Email is great for sharing information, especially complex ones. Phone is great for a real-time debate where you also get to analyze tone. Video is best if you want to also factor in body language, typically when opinions are involved. Text message is ideal for quick coordination or very quick questions. While in-person meetings are limited for the time being means it’s harder for investors and entrepreneurs to collaborate, which means effective communication is even more important. And the world is adapting, for instance even a widely-held belief among VCs that they have to meet the entrepreneur in person has been shaken, as a survey NfX published on Jun 2 2020 shows:

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Originally published on “Data Driven Investor,” am happy to syndicate on other platforms. I am the Managing Partner and Cofounder of Tau Ventures with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are my own.

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Amit Garg
I have been in Silicon Valley for 20 years -- at Samsung NEXT Ventures, running my own startup (as of May 2019 a series D that has raised $120M and valued at $450M), at Norwest Ventures, and doing product and analytics at Google. My academic training is BS in computer science and MS in biomedical informatics, both from Stanford, and MBA from Harvard. I speak natively 3 languages, live carbon-neutral, am a 70.3 Ironman finisher, and have built a hospital in rural India serving 100,000 people.

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