Council Post: Financing In The Pandemic Era: Options For Global Startups

CEO of Smartlink Communications. Global analyst, consultant and trainer, passionate about leadership, global communications and competition.

Any crisis — alongside its negative aspects such as the health and economic effects of the Covid-19 pandemic — brings about an opportunity for innovation. New problems welcome new ideas and fresh solutions. As one might expect, there has recently been an increase in the number of startups in the U.S. Unfortunately, even some of the most brilliant endeavors do not succeed. One reason why this often happens is due to the inability to find investors, or a lack of information and planning related to funding options. 

You may be a new business founder trying to seize the opportunities offered by the pandemic, or a founder who is using the extra time you have due to the lockdown to plan your business growth, or maybe you are a startup founder and you’ve been planning your next business move for years — this article will help you get a quick outlook on the next steps in your fundraising journey. 

Many governments stimulate investments through various grants, which can be a great tool to jump-start your company’s growth. Due to Covid-19, government funding options for startups today often focus on innovation continuity. Other grants stimulate cash flow or employment and are designed for startups that have already launched a product and perhaps have had a few rounds of investments. 

If you’re lucky to live in a country where investment schemes are available, you can attract foreign business investors as business partners even before establishing the legal entity, as many foreign investors are looking for a business idea they can join, either due to diversification or because it’s not easy for them to start a business from scratch. 

But dealing with government programs and investment schemes is not always an easy task, especially if you don’t have advisers to guide you through every issue that may arise during the process. Learning how these programs really work is an essential part of getting things right and securing funding. Various reasons could push you toward prioritizing other fundraising options. 

So, for starting a new business and finding capital, I believe angel or seed investors are the way to go.

You’ll find listed on various websites and databases the angel investors who seem to throw their money here and there in exchange for an equity stake in the companies they invest in, but actually getting in contact with them and convincing them that you are worthy of their money is the hard part. It all starts with building your image and proving that you’re capable of getting them a return on their investment — and that’s done through showcasing team experience, soft skills and lots of data. 

Fundraising is always hard, but the first angel investment or seed investment you get in your company gives you huge fuel for the next fundraising round and often gets you to the market. So, you’ll want to really define who you are before reaching these investors; they are tough negotiators, so you’ll need to be trained in speaking with them and convincing them to invest. To build trust, you need a clear vision and a competent action plan.

Once you succeed in launching your product, you’ll need financing for your growth phase as well. If your startup is really innovative, venture capital funding might be the option for you, but negotiations with them are even tougher than with angel and seed investors. Attracting a venture capital investment gives you the badge of innovator in your field and is proof of your growth capabilities; this will attract other investors in your company quickly if you are prepared to build a network around your investors. 

If venture capital is not something you managed to get, in order to move forward with your growth and depending on the trading history of the business you manage, you’ll be looking for working capital finance, debt financing and venture debt; offered based on your cash flow and future forecasts, these facilities are sometimes provided by traditional banking and investor players in the market. 

Also, if you see there are issues in your supply chain and you’re in need of cash to pay expenses, it is crucial to try finding additional ways of financing that could keep the company afloat, using invoice finance, trade finance or other business cash flow financing solutions.

Some new ways of fundraising, especially for the initial stages of fundraising and in order to avoid the stress of dealing with angel/seed investors, involve crowdfunding or tokenizing your activity and raising through an initial exchange offering (IEO) or other token offerings on crypto exchange platforms. These fundraising options are becoming more and more popular because they allow you to set your own terms to the investment. 

I’m lastly going to talk about probably the biggest fundraising decision a company is ever going to make: going for the IPO. There’s a huge amount of work to be put into preparing for this type of fundraising, from the legal side to the PR side. You’ll need the right people on your board to help you get through every step as planned, and once listed on a stock exchange, you’ll need to constantly keep investors interested in your shares and informed about progress.

Some companies decide not to go for an IPO and remain private; when in need of cash, you will typically get funding through working capital finance and debt financing, which means you’ll need to keep a good relationship with your banking partners. 

Many startup founders get stuck in the process of developing their products due to lack of funds, and this might translate into missed opportunities. The key to getting past this challenge is to have the right information at the right time from your network and your advisors and to research and plan ahead.

What you should keep in mind, no matter the stage of fundraising you are in, is that everything starts with your image. The more you work on it, the better the fundraising results.

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