Summary List Placement
Remote fundraising has become the new normal for startups as the COVID-19 pandemic continues to restrict the ability to travel and take meetings in person.
In more ordinary times, founders and executives pitch prospective investors for funding at swanky city offices before an investment committee makes a decision.
After that follows a lengthy due diligence process, technical and market questions, analysis of finances, plus time spent on meetings, dinners, and walks for investors to better understand founders and CEOs ahead of any completed deal.
But the coronavirus has changed all of that.
Since March funding rounds in North America, Europe, and Israel have been conducted entirely over video calls, changing the dynamic between founders and investors.
One such funding round was a recent $17 million raise by Israeli tech startup Ermetic, led by CEO and cofounder Shai Morag. The fundraise took place entirely over Zoom with lead investor Accel.
Accel would conventionally spend a few days in Israel to meet the founding team and speak to other employees to better understand the business but were forced to do things remotely instead.
“It was pretty strange,” Morag told Business Insider in an interview. “Building trust with the one you are choosing to work with in the future is important and doing it over video changes things.”
Business Insider spoke to 15 founders and investors who have raised rounds remotely during the pandemic to get their top tips on wooing investors during a financial crunch.
‘You need to be more prepared than usual.’
Startup: Ermetic, cloud security startup
Funding raised: $17 million
Backers include: Accel, Glilot Capital Partners, Norwest Venture partners
“You need to be more prepared than usual,” Morag told Business Insider.
“All meetings are in Zoom, they tend to be transactional and more focused, it’s a hard dynamic with more than one person in the meeting. You can’t write things on a whiteboard so we made sure we had presentation slides for things we wouldn’t usually have in a deck to ensure information was accessible.”
‘Don’t cast your net too wide.’
Startup: Persefoni, B2B carbon-tracking startup
Funding raised: $3.5 million
Backers include: Rice Investment Group, Carnrite Ventures
“As the pandemic hit, almost overnight, we went from one of the frothiest VC markets in history to investors saying, ‘We’re not taking conversations right now,'” said Kentaro Kawamori, cofounder and CEO of Persefoni.
“In Silicon Valley, everybody likes to fashion themselves as some kind of uber-successful contrarian, capable of spotting the trends before anyone else. But the fact is VCs are some of the most risk-averse people around – they’re fast followers.
“More often than not, they’ll wait to see where someone they respect goes, then they’ll all pile in at once.
“My advice would be: Don’t cast your net too wide. Don’t go out there trying to hit 40 or 50 different VCs, just focus really tightly on those with whom you think your mission really aligns with, and work hard at trying to get their attention.”
‘This is a prime opportunity to prove your leadership abilities as a founder.’
Startup: Enko, AI agritech
Funding raised: $45 million
Backers include: The Gates Foundation, Anterra Capital
“Most of our fundraising was done over video conferencing platforms – mostly Zoom or Microsoft Teams,” said Enko CEO Jacqueline Heard. “While it was an initial adjustment, our remote fundraising efforts went surprisingly well. Most initial fundraising work and early diligence is handled over the phone anyways, so transitioning to video conferences was fairly easy.
“The part I missed most was getting to meet with potential investors in person. I tried to treat every video call with potential investors like a traditional in-person meeting and found that video conferences can actually be fairly personable.
“The inevitable intrusions of working from home in a pandemic situation helped to personalize the meetings and often led to deeper connections. Thanks to COVID restrictions, I was introduced to more children and pets in the first few weeks of our investor relationships than I would normally meet in years!”
Heard added that she found remote meetings didn’t really change the overall dynamics of fundraising. “Ultimately, it is important to know your business and your industry well, communicate your value proposition clearly, and connect with your potential investors on a personal level.”
Heard added that founders need to be prepared to proactively address how the crisis is impacting their business and what mitigating steps they are taking.
“To earn investor confidence, it is critical that founders demonstrate forward-thinking and agility – the current crisis is a prime opportunity to prove your leadership abilities as a founder.”
‘Good companies will raise money in a tough market.’
Startup: Quantexa, AI fraud detection
Funding raised: $65 million
Backers include: Evolution Equity Partners, HSBC, Accenture
“Good companies will be able to raise money in a tough market,” said Quantexa CEO Vishal Marria. “If there’s already demand for what you’re offering, the hard part is done. Next, you just have to demonstrate that to your investors.”
“I benefitted from having a lot of experienced people already sitting on my board, which was invaluable.
“To be completely transparent, I was a bit nervous about the process of trying to raise money over Zoom. Chemistry is really important to me, and it’s hard to capture it over a video call the way you can face-to-face.”
‘Channel your energy into your remote pitches.’
Startup: Spike, office communications tool
Funding raised: $8 million
Backers include: Zoom CEO Eric Yuan, Wix, Insight Partners
“Luckily, I got to meet with Insight Partners face to face in February and to get them excited about Spike with an in-person pitch,” said Spike CEO Dvir Ben-Aroya.
“Right after our initial meeting, the global pandemic forced us, like the rest of the world, to continue our conversation and the due diligence process remotely…
“While nothing can replace a face-to-face meeting with all the energy and passion that can be conveyed, founders need to focus on how they can transfer that same energy into a remote pitch.
“During a time of crisis, everyone retreats to their safety nets. It’s more important than ever to show how your product and vision provide real value in the good times and the bad.
“For example, Spike’s solution makes people and businesses more efficient, which became critically important for remote teams during this crisis. Investors have adapted their processes to remote work as well, and looking for big innovative ideas, passionate founders and teams, so don’t wait for a better time.
“Go and get ’em.”
‘Honesty is the best policy.’
Startup: Urban, wellness services app
Funding raised: $7.5 million
Backers include: BNF Capital, Seedrs crowdfunding community
“We had been planning to raise a larger round, but the pandemic meant we had to put that on pause.
“Luckily, the relationship with BNF went back a long way, and they were happy to invest, but it required having some very open and honest conversations about the kind of impact the crisis was going to have on us.
“Even though that can be difficult, I think people really appreciate honesty in the long run. No one wants it sugar-coated – they’ll appreciate you letting them know exactly what the situation is.
“We decided to take the rest of the round to Seedrs, where we now have literally hundreds of investors with a vested interest in our long-term success. We think of it like having hundreds of freelance marketing people, letting people know about us through word of mouth.
“We’re incredibly grateful for the support that we’ve received, and to have such a strong community of backers, who have a vested interest in our success, spreading the word to their friends and families.”
‘Use your newfound free time to build relationships.’
Startup: Apheris, deep tech data privacy solution
Funding raised: $3 million
Backers include: Twitter chairman Patrick Pichette
“We did the the raise entirely via Zoom,” said Robin Roehm, cofounder and CEO of Apheris. “We also put additional efforts into creating an online ‘data room’ with lots of information about the company. This enabled investors to learn more about us and our style of working without directly interacting with us.
“It’s important to have a clear strategy on COVID-19, and think about how it affects your business, and how you can adapt your business to grow under the pandemic.
“Use the time you’re saving not traveling to build relationships with your stakeholders and other VCs. Throughout the start of the pandemic, we did multiple one-on-one calls over Zoom, including some 20-plus meetings with different fund managers.
“You need to pen in your follow-up meetings, too. After every meeting, write down a summary and what your next steps are going to be – investors will respect the fact you’re on top of everything.”
Startup: Lifted, social care network
Funding raised: $2 million
Backers include: Fuel Ventures, MyVoucherCodes founder Mark Pearson
“Project confidence,” said Rachael Crook, CEO of social care startup Lifted. “Early-stage investors want to buy into your dream of the future so it’s important to project confidence in your company and your idea. It’s okay to be nervous when pitching to investors, everyone is and particularly so right now, but try to remember investors are looking for the next extraordinary company and your job is to make them believe that is you.
“The pandemic is an opportunity to show how you can handle a crisis. This is vital as startups face multiple crises. Take notes on how you are adapting. You will be doing much more than you realize. Use these to tell the story of how you have come out stronger.
“Don’t neglect the metrics. The most important thing is to keep growing the business. I know that’s easier said than done but try to set a level of growth you are happy with and make sure you stick to it.
“And don’t forget to take care of yourself. Fundraising is hard and stressful at the best of times. It is really hard now, not to mention trying to steer your company through the pandemic. Make sure you take protecting your mental and physical health seriously — don’t neglect the things that help you manage the stress and remember you have already come so far. You can do this.”
Startup: Esusu, social enterprise fintech
Funding raised: $4 million
Backers include: Linkedin chairman Jeff Weiner
“After our first fundraising round, we made a commitment that we wouldn’t raise from a place of weakness,” said Samir Goel, CEO of finance startup Esusu. “When we opened up our most recent round, we had plenty of financial runway to play with, whether we raised now or in another 18 months.
“It’s really important that you do your homework: Make a list of VCs you want to target for the round, just have that funnel set up, and start reaching out. Eventually things will move from making contacts to just maintaining those new relationships.
“And those relationships are incredibly important. Before Jeff Weiner invested in us, we had met the person that ultimately introduced to him at a party two years earlier. We had no idea what that would lead to, but we knew it would be worth keeping in touch.
“Ultimately, you just have to keep persevering in the face of a lot of people telling you, ‘No’…Think about it like you’re building an island: You need to build a boat to get out of there or it’s not gonna end well. There’s no Plan B.”
‘Don’t waste time with VCs that don’t understand your tech.’
Startup: PQShield, cryptography and cybersecurity
Funding raised: $7 million
Backers include: Kindred Capital, Crane Venture Partners
“It was a challenge for me as we were in the middle of fundraising when COVID-19 forced us to go fully remote,” said PQShield CEO Ali El Kaafarani. “Doing all the negotiations over the phone was testing. From experience, I would always recommend jumping on a call instead of text messaging, as it can waste time and cause unnecessary misunderstandings.
“In terms of advice for other founders, I would say: Be super ready, ambitious, positive, and focused.
“Time is more crucial now than ever, so make your fundraising time window short with clear deadlines. Have your own list of the funders that you would like to have on board, know their decision-makers, and talk to them directly. Don’t waste time with funders that don’t understand the basics of your tech or your business.
“Crises don’t last forever, so take it into consideration but don’t get stuck at it, and move past it in your planning. Ambitious founders are what the world needs to recover. You are a part of the solution — convey this message!”
‘In some ways, raising over Zoom was actually better.’
Startup: Deel, remote working software
Funding raised: $48 million
Backers: Andreessen Horowitz, Spark Capital
“Directly messaging people is great. As far as I’m concerned, with VCs, it’s kind of their job to check in on you and see what you’re up to.
“In some ways, raising over Zoom was actually better. Taking meetings in-person often means a lot of travel, a lot of Ubers or trains and planes. With this, I could speak to one investor, and literally just click off from one meeting to the next. That really helps create a sense of urgency.
“My fundraising strategy is, effectively, to never really need to be fundraising. If you’re a position where you need the money, it means you probably messed up somewhere.”
Startup: Psykhe, e-commerce fashion startup
Funding raised: $1.7 million
Backers include: John Skipper, DAZN chairman and former co-chair of Disney Media Networks
“It’s an obvious one, but always have a good answer for how the pandemic creates an opportunity for your start-up. If you haven’t figured this out, start there.
“Find a way to really show up and let your energy transmit in calls. That might mean taking some time to get ready and center yourself ahead of calls with investors in order to tap into a good energy.
“I found that it would be hard to present well if I was frazzled, so I always took an hour off before an investor call, and decompressed. Having a sense of presence, appearing relaxed, and assured, goes a long way.”
‘However long you expect things to take, double it.’
Startup: Blueheart, sex therapy app
Funding raised: $1 million
Backers include: PROfounders Capital, Calm/Storm Ventures
“We did everything over WhatsApp calls and it was nothing short of crazy,” said Blueheart CEO Sachin Raoul. “At one point we needed access to a paper contract that was on a campus that it was illegal to set foot on, which delayed the deal by two months.
“However, in the midst of the crisis, certain people showed that they were worth their weight in gold. We specifically chose our lead investor, PROfounders Capital, because we felt they were trustworthy, moral and aligned with our values; and the crisis confirmed that. They were willing to be extremely flexible to get things across the line.
“However long you expect your fundraising to take, double it. That means financially planning for that process to take twice as long as it would under normal conditions.
“If you don’t and the process gets delayed, you’ll be in a weak position at the negotiating table. We had plenty of runway well into lockdown purely from watching every penny from the start. That meant we weren’t sweating when the process took longer. Countries could go back into isolation, investors could see plans change – who knows what could happen.
“It’s a new fundraising world, one in which things can take longer, so adapt in order to survive.”
‘Keep your pitch short and snappy.’
Startup: Envizion Medical, healthtech
Funding raised: $18 million
Backers include: Technion Venture Capital fund
“Over video, someone’s attention span is 30 to 45 minutes. It can’t be a presentation only, not just a PowerPoint,” Doron Besser CEO of Israeli startup Envizion Medical told Business Insider. “In med-tech particularly, people need to be able to see what we are speaking about, in our case a demonstration because this overcomes the barriers of a remote video session.”
“Keep it short, three to five slides, and then leave time for Q&A so you can bond with potential investor and company.”
‘Daily calls let you go deeper than usual.’
Startup: Moteefe, e-commerce platform
Funding raised: $11 million
Backers include: BGF
“The due diligence process for fundraising remotely is exactly the same,” Mathijs Efting, cofounder and CEO of ecommerce startup Moteefe, told Business Insider.
“The sessions are about matchmaking as much as anything and it’s harder when it’s not face-to-face. We had daily calls for three months in a row with investors and you develop more of a personal and value level perspective where we share ambitions and go deeper than you would usually.”