How Startups Are Elevating Cash At the moment [Data + Expert Insights]

Startup founders, particularly early-stage ones, have been feeling fairly the pinch in recent times with regards to fundraising:

Practically 1 / 4 of fundraising rounds are down rounds in Q1 2024
Time in between rounds is getting longer
General deal rely is low

It makes us marvel: How are the founders holding up? How ought to they adapt?

Q1_had_the_highest_share_of_down_rounds_in_the_last_5_years Supply: Carta

My colleagues from HubSpot for Startups got down to discover the reply.

They surveyed 500+ early-stage startup founders — from pre-seed to sequence B — throughout the US and Europe, and compiled an insights report that I can solely describe as… meaty AF.

Some snippets of their findings:

52% of founders pitched 10-50 traders earlier than getting any funding
42% say that fundraising has been tougher within the final yr
53% of startups elevating $4m+ are AI-based (shock, shock)

Oh, and nearly 60% of the startups surveyed categorize their services or products as AI.

Whereas AI-based startups are getting a leg-up within the fundraising race, it nonetheless takes a mixture of basic strikes and new tech to up their rizz in entrance of traders.

What are these strikes, you ask?

The complete report covers an intensive quantity of survey knowledge and knowledgeable insights from each ends of the spectrum. However to provide you a style, listed below are some gems straight from the horse’s mouth.

1. What Are Buyers Trying For?

Josephine Chen, Associate at Sequoia Capital

In VC fundraising, the secret is to seek out product market match. When it occurs, you see an inflection level of some kind. It may very well be:

Consideration
Person development
Product velocity (i.e. individuals asking you for extra options)

All of us have a look at the market, the founder(s), the product, and the extent of buyer love. For every stage, we weigh completely different components of those barely in another way.

It is concerning the market dynamics and there being a very good ‘why now?’ We search for the intersection between the market and an outlier founder. And in all our early stage corporations, we need to see velocity, in each pace and route.

Jason Druker, Chief Industrial Officer at SFC Capital

At SFC, it actually comes all the way down to the crew. We take as scientific an method as doable to assessing the cofounders (we like co-’s moderately than solos).

It is not about their background or ethnicity — actually, we go the opposite approach and put money into underrepresented founders and have a range mindset. We have a look at how a founder’s persona aligns with their cofounder. We wish to see any person who’s pushed, then another person who’s both gross sales or any person you need to comply with.

Nate Morgan, HubSpot Ventures investor

What we additionally search for, and what founders shouldn’t underestimate, is the ability of a powerful group with regards to securing funding in a aggressive VC panorama for AI-native startups.

Constructing group inside your early buyer base and accomplice ecosystem means you may develop it over time, and a big (and loud) group on-line tends to face out over all the things else.

2. On Fundraising Timelines

Sophie Winwood, Co-Founder and CEO of WCV:E (a VC summit)

Fundraising basically continues to be fairly troublesome. We have seen timelines lengthen — seed is wanting like 3-4 months. That is a major soar.

My rule of thumb:

Pre-seed: Give your self as much as 3 months. If it is taking longer, possibly one thing’s not proper.
Seed: As much as 6 months
Collection A: As much as 12 months

It is change into an investor-friendly market, and extra time is being taken by traders, which is an efficient factor for each side. You need an investor who actually is aware of what you are promoting — they’re extra more likely to be a long run participant and assist what you are promoting in the event that they construct the relationships earlier than funding.

Eva Dobrzanska, Managing Director of Fundraising Playbooks

Begin elevating before you assume it’s good to. You are not going to construct a relationship inside one touchpoint of 1 electronic mail. End off your first outreach with a cliffhanger, then comply with up with related updates. Then it turns into a line, not only a level.

Jason Druker, Chief Industrial Officer at SFC Capital

Founders want to think about [fundraising timelines] as far out as doable. Be pushed by the runway, but in addition by the truth that your runway might simply run out while you are elevating your seed spherical. Begin that course of as early as doable and allow your self utilizing tech.

3. Common Recommendation

Olivia O’Sullivan, Associate at Discussion board Ventures

Take the time upfront to set your self up for fulfillment. Arrange a CRM so as to work by the phases.

Add any investor who tells you, “we could be ” to a nurture bucket in your CRM. Anytime one thing large occurs, ship an electronic mail replace to that entire listing of individuals within the nurture bucket.

Eva Dobrzanska, Managing Director of Fundraising Playbooks

I am an enormous advocate of an internet presence and posting usually. I can’t rely what number of alternatives have come my approach simply due to LinkedIn. Publish and speak to individuals and showcase what you have been doing. The group side is big — it is a small world.

So be current on LinkedIn, attend conferences, and present up the place your very best traders are… Individuals do enterprise with individuals they like, and folks put money into individuals they like.

Now go try the full report for: