How to Raise Venture Capital In A Down Market, by Tom Taulli, was originally published on Forbes.com.
Mercury Fund Partner, Blair Garrou, shares what entrepreneurs can do to make their startup a more investable business as fundraising becomes more challenging.
For entrepreneurs, it’s likely to get much tougher to raise money from venture capitalists (VCs). The stock markets have been volatile lately and IPOs have been horrific, as seen with deals like Square (SQ). In fact, there were no offerings in January!
So what to do? Well, I’ve been talking to a variety of VCs recently and the consensus is mostly uniform – that is, the current environment will likely take a while to improve. In other words, it is critical for entrepreneurs to have a realistic funding plan and to also be sober about the revenues. Snagging new customers will probably get harder.
“We do not want to see companies on the hamster wheel,” said Blair Garrou, who is a managing director at Mercury Fund, “where there needs to be large amounts of money raised on a frequent basis. Rather, we are looking for entrepreneurs who show that they can be lean and capital efficient. We want to make sure that the money can last 18 to 24 months.”
Yes, this means doing things like buying furniture at IKEA, not from high-priced vendors. But there should also be creative strategies to find levers in the core business.
