Anti-Cacophony Partners
Raising Money as an Early Stage Startup Now? Yes You Can!
More than any time I can remember in the last twenty years, the advice from venture capital firms to their portfolio companies is overwhelming: don’t raise money now if you can avoid it. The environment is terrible, investors aren’t putting money to work. You need to extend your runway and do what you can to push off fundraising six months, if not twelve or eighteen.
But for how many startups is that realistic? Very, very few — especially if you’re Seed to Series B. So, sure, it’s not a great fundraising environment, and if your entire focus as an early-stage startup has been growing the top line regardless of customer acquisition costs, retention, or cash burn, you’re going to have a hard time. Without material changes to your approach, you’ll likely be forced into unpleasant decisions, including, ultimately, getting acqui-hired or worse, shutting down.
But companies that, over the last six to nine months, have become more focused on the quality of their revenue and have taken real, effective steps to extend their cash runway are raising money in today’s environment. It is possible!
So, what’s it take?
- A clear and solid story — a concise and compelling pitch, understanding of your market, persuasive go-to-market and expansion plans, and a strong grasp of the metrics that drive your revenue and how to manage them.
- An incredibly strong team. Investors invest in people as much as ideas. Build a team with a mix of skills and expertise. They don’t all have to be 20-year veterans, but one or two people who’ve done it before can make a huge difference in avoiding pitfalls. If you have gaps, especially on the experienced startup veteran side, consider engaging fractional support for guidance, expert advice, and execution.
- A growth and financial model that focuses on balanced and smart growth in a way it didn’t need to two years ago.
- Your growth assumptions should still be optimistic, but achievable, and your key revenue drivers should be defensible.
- The expense side matters more than it does in a bull market. If your revenue is increasing 5x per year but requires your ad spend or sales team to also 3–5x (or worse), investors will move on, even if two or three years ago they’d have fallen in love with that revenue growth.
- On the flip side, if your model shows revenue increasing 3–5x per year but expenses flat or increasing only 50% with no clear explanation of the leverage, investors will also move on.
- Ultimately, show that you understand how you’ll get your company to the holy grail: profitability, where you control your own destiny. It doesn’t need to happen in the next twelve to twenty-four months, normally, but you have to understand how you’ll get there and how long it will take.
- Networking and transparent communication. Keep your existing investors apprised of your progress. Ask them for help, tips, and introductions. Keep your broader network updated. Ping your old manager and colleagues. Talk to key vendors and customers you have a strong relationship with. If you’ve built a transparent culture within your team (and you should have), ask them for introductions and ideas — most have likely worked at other startups and may have had opportunities to interact with investors there. An occasional ping requires minimal distraction but makes them feel like part of your company’s success and builds trust.
- Patience and unending optimism. If you’ve been fundraising for months already, it’s hard not to get fatigued, and investors can sense that. What do you need to do to reset your mood before another pitch? Whatever it is, do it before you start that next meeting. Lean in when you talk. Be excited. Explain to the investor why you want them on your cap table.
- Creativity. What other ways can your company generate cash or reduce cash burn? Have you reviewed all your software spend? Are people still traveling? Can you give customers discounts to encourage them to increase spend, speed up the sales cycle, or extend their relationship with you? If you still need to hire, can you engage consultants or fractional employees rather than full time? Can your hires be remote or offshore? Be creative and flexible!
- Alternative forms of financing.
- If you’ve got six or more months of cash, a number of debt firms could be a good fit for runway extension. Engage your finance lead or fractional CFO to reach out.
- If you haven’t already asked existing investors about a convertible note or SAFE to extend runway, do it now. Don’t wait until cash runway is less than six months.
Ultimately, fundraising in this environment is not, say, fun. But it is possible, and you can do it! Investors are writing checks. Sure, they’re being more careful, and yes, the time to close is extended, but if you’ve done the work above and prepared for the fundraise, you can get it done. Best of luck!