Originally published March 2023

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 to grow the top line, regardless of customer acquisition costs, retention, or cash burn, then you're going to have a hard time, and without material changes to your approach, you'll likely not have a successful fundraise and will be forced in to unpleasant decisions, including, ultimately, getting acqui-hired or worse, shutting down.

But, companies that over the last six-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 & solid story. This includes a concise & compelling pitch, understanding of your market, persuasive go to market and expansion plans, and strong understanding of the metrics that drive your revenue and how to manage those metrics.

Incredibly strong team. Investors invest in people as much as they invest in ideas. Build a team with a mix of skills and expertise that can help your startup grow. They don't all have to be 20 year veterans, but 1 or 2 people on the team that have done it before can make a huge difference in avoiding pitfalls. If you have gaps on your team, especially on the experienced startup veteran side, consider engaging fractional support to provide guidance and expert advice and execution

A growth & financial model that focuses on balanced & smart growth in a way that it didn't need to two years ago.

Your growth assumptions should still be optimistic, but they should be achievable, and your key revenue drivers should be defensible

The expense side is now more important than it normally is in a bull market. For example, if your revenue is increasing by 5x per year (woo hoo!), but it requires your ad spend or your sales team to also 3-5x or worse, investors will move on, even if 2 or 3 years ago, they'd fall in love with that revenue growth

On the flip side, if your model shows you increasing revenue by 3-5x per year, but your expenses are flat or increasing by only 50% with no clear explanation of how you'd generate that leverage, investors will also move on

Ultimately, show that you understand how you'll get your company to the holy grail: profitability, where you can 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 & transparent communication. Keep your existing investors apprised of your progress. Ask them for help, ask them for tips, ask them for introductions. Keep your broader network updated on your progress. Ping your old manager & colleagues. Talk to key vendors and customers with whom you have a really strong relationship. If you've built a transparent culture within your team (and you should have), ask them for introductions and ideas. Most of your employees have likely worked at other startups, and they might have had opportunities to interact with the investors at those companies. Although you don't want to distract your team from their day job, an occasional ping will require minimal distraction but will make them absolutely feel like part of your company's success and make them feel trusted

Patience & 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? Run around the block? Jumping jacks? Spin in circles? Whatever it is, do it before you start that next meeting. Remember to lean in when you talk. Remember to be excited. Remember to explain to the investor why you want *them* on your cap table.

Creativity. What other ways can your company either 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 their 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 still got six or more months of cash, there are a number of debt firms that could be good fits for runway extension. Engage your finance lead or fractional CFO to reach out to these firms.

If you've not already asked your existing investors to do a convertible note or SAFE to extend your runway, do that 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 above work and prepared for the fundraise, you can get it done.

Best of luck!