There’s no denying we are in the midst of an economic downturn. Spending has slowed, prices have risen, and redundancies continue to be announced, particularly in the tech space. This year alone, 81,000 employees have been laid off across the UK during March 2023 — including even the most secure tech giants like Amazon, Google, Meta, and Microsoft. As you can imagine, the already challenging task of raising funding for a startup becomes even more arduous in this kind of climate.
The proof is in the numbers. According to Crunchbase, global VC funding fell 53% year on year in Q1 2023, continuing a downward trend that began in the first quarter of 2022.
In the UK specifically, KPMG reported a 76% decrease in invested funds YoY, from £12.3bn raised in Q1 2022 to just £2.9bn raised in Q1 2023. Companies looking to raise Seed or Series A rounds are having to fight more for their portion of a ‘decreasing in size’ pie, so having a strong strategy is vital.
Going through our own recent series A funding round this year, it’s clear that investors are looking for more proof, better structure, and a strong plan for how they’re going to see a return on their investment.
Highlight your UVP
In today’s uncertain market, securing funding is hard. Gone are the days of speculative growth without robust potential revenue streams. Having an innovative product and an airtight business model is fundamental to success. Beyond that, investors are looking for companies that are focused on achieving profitability across a large but concentrated addressable market.
When highlighting your unique value proposition, or UVP, make sure to demonstrate how you’re going to win in one market first. Emphasise the need for your product or service within that market, articulate your competitive advantages, and showcase the potential for long-term growth.
Alongside this, coming to a pitch with a proven customer base makes you far more attractive to investors. Even if that customer base is in development, an investment opportunity will be more viable if there are at least a few customer champions on your side. Pair that with a carefully qualified pipeline and an infrastructure that is equipped to scale and you’re setting yourself up for success — or at least a positive first impression.
Finally, come armed with a clear plan to profitability detailing when and how investors will make their money back, and a compelling story on where you’ve been, how you’ve arrived at this specific product, who will execute the vision, who you’re targeting, and why they’ll buy.
Build the right team
When scoping out potential opportunities, investors won’t stop at the business proposition or technology, they will also want to gain confidence in arguably the most important asset – people. Some might even invest on the basis of the leadership team alone, as Lightspeed Venture Partners just did with Mistral AI to the tune of $113m despite the startup only being four weeks old and without any customers.
Investors prioritise teams that have a diverse skill set and with a portfolio or proven track record in the industry. I’ve always sought to surround myself with exceptional people, who share my passion and drive whilst bringing a different perspective and experience to the table.
My co-founders, Tom Darnell and Rob Reng, bring a breadth of knowledge and a commitment to excellence that has been essential to getting us to this point. So have Toby Brzoznowski, who joined as an investor and executive member of the team after building his own billion-dollar SaaS company, and Neil Titcomb, who brings proven expertise in contact centres and the ability to reach the people who need our technology the most.
Without a doubt, having a plethora of expertise at senior management and board level that is designed with the future in mind creates a strong investment opportunity.
External advisors can also play an important role in raising funds. There’s no ego in asking for help to shortcut complex issues; it can only benefit your business and add credibility from an investor’s perspective. These advisors provide industry-specific experience and knowledge that unlock opportunities, encourage debate, and ultimately, build a stronger business model designed to last.
Find the right investors
Even before the pitching stage, being in front of the right investor is imperative. Doing research here will pay dividends, so you’re spending valuable time engaging with aligned specialist investors in your sector or your growth stage, who can contribute long-term.
The good news is that the kind of investors you want are also looking to find companies that align with their values and mission statements. Look out for those who take the time to explain why they invest in certain companies, champion the startups in their portfolio, and provide tangible support to their founders through various platforms.
We knew our partnership with Puma had synergy when they interviewed the leaders at IRIS Audio and everyone — both them and us — came out of those meetings feeling excited and confident about the future. That’s when you know the value of investors will reach beyond the cash itself.
Despite the challenge posed by a global tech turndown, raising Series A funding is still very much within reach for resilient and well-prepared startups.
By effectively positioning your UVP, building the right team and a strong network, you can increase their chances of securing the Series A funding needed to propel a new venture to the next level.
Perseverance, adaptability, and strong planning are important in any fundraising situation. In times like these, they’re indispensable.
Jacobi Anstruther is the CEO and founder of IRIS Audio.
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