It does not matter stage your business is in, raising growth finance is stressful, unpredictable and distracting greatly from actually running the business. And it has gotten worse in the past nine months as the turbulent global economy leaves public and private markets struggling to breathe.
I was faced with a similar situation at the end of 2021. I was about six months away from starting the fundraising process for my company’s Series B when it became clear that the global economy was deteriorating rapidly and I had to reassess the timing of the next round.
Here are some of the steps my team and I took to analyze the situation and close out a successful Series B:
The difference a year makes
My company reached a Series A in November 2020, just as investment in cloud computing and digital transformation initiatives accelerated. About a year later, it became clear that the market was spinning.
Timing the market is impossible, but as much as you can raise money when your numbers are big.
The first signs were significant falls in the valuations of publicly traded companies, with some previous high-flyers losing 60%-70% of their value. It was unclear how much this would affect VC investment as many of the top companies had and still have significant dry powder on their books.
However, we assumed that VCs would not be able to land as many new deals as before so they could focus more on and reinvest in their existing portfolio companies. This assumption was validated when a preventive offer was pulled into my financing process just a week.
The decision process
While it is important to get input from trusted sources, ultimately you need to decide when to raise capital based on all the available data and your instincts and experience as an entrepreneur. You need to consider the performance of your business and analyze it through an optimistic but realistic lens.