If the economic downturn is causing your sales to slow, you need to quickly raise some cash to tide you over. Sooner is better than later for raising funds, says John Taylor, vice president of research at the National Venture Capital Association. With the stock market trending down, he says, angel and venture investors may feel less flush and be more hesitant to invest in the coming months.
"We are definitely advising people to raise a little bit more while they can and spend a little bit less for the rest of this year," says Flybridge Capital Partners general partner Jeffrey Bussgang.
Online-video company Blackwave Inc. took this advice to heart when it sought $16 million in round B funding late last year. The stock market had already begun to gyrate, so Blackwave president and CEO Robert Rizika, 42, decided to take advantage of the high interest in Blackwave's technology and seek more money than the year-old startup needed right away.
Last December, Blackwave closed on $16 million in VC funding after just two months of fundraising with Flybridge, Globespan Capital Partners and Sigma Partners. The money will be used to get Blackwave's more-efficient video storage product ready to be mass-produced, hire sales reps and begin marketing."It could be tough to raise money in the future," says Rizika, who projects sales for his Acton, Massachusetts, company to reach eight figures this year. "And you never know--development or finding customers could take a little longer than you think."
To speed up fundraising from angel investors and VC firms, Bussgang and Rizika offer these tips:
Choose your targets carefully. Don't waste time on angels or venture capitalists who don't specialize in your industry. Network and try to secure introductions to investors who are in your arena.
Get your ducks in a row. Polish your financial statements, customer references and company pitch before you approach investors. This will eliminate delays while you produce additional documentation.Don't be afraid of debt. Consider seeking a venture-backed loan rather than venture capital, says Bussgang. The deals can come together fast, and as a bonus, you give up less company equity to investors.