Hi. Bob Spoerl here. I had a chance to attend Young Startup’s New York VC Summit on Sept. 7 and learned a lot. I realize that I am neither a venture capitalist nor an entrepreneur currently raising any money (unless someone has some crazy good terms for me!). However, we do work with clients raising money—brand awareness and PR done the right way provide enormous boost and credibility in those critical stages of a company as discussed in our 9-Point ROI Framework—and are strategically aligned with Enterie, a group of more than two dozen independent PR and communications agencies with VC relationships. So, you know, this summit made sense. Plus, I couldn’t resist the chance to sweat it out in 95-degree weather in the concrete jungle I love-hate that is New York. Seriously, I love New York. But then, sometimes, I’m like—okay, this is why I’m in Chicago whenever I’m in New York. But I digress.
On to some key findings from my time in a room of hundreds of startups and funders (and a small portion of outliers like me).
Venture capital is tough to get for startups in the current economic environment
Yes, a sweeping generalization here. But one angel investor who had also been a part of multiple companies who had successfully gone through rounds of funding noted this is the toughest environment for raising capital from VCs in the last 30 years. Probably not what the founders want to hear from a funder, but that was his perception of the current market.
The “market-is-tough” sentiment also rang true during a conversation I had with a Detroit-based Medtech company raising a Series A. The co-founder I spoke with noted his perception of the current environment for funding is “one in which VC is in a position of power—they are being extra rigorous with valuation figures, particularly in the Midwest. He’s hoping for a firm to swoop into their upcoming series to peg a higher valuation. But again, the market is tough.
What to do?
Focus on fundamentals
In tighter economies, it’s useful to go back to the basics. Businesses need to have a strong path toward profitability and show momentum. But, scalability at all cost is not the answer. Your projections “need to tell a story about how you’re going to get where you’re going,” one VC noted.
The real fundamentals rely on three key areas (I’m summarizing this from both what I heard from VCs and founders who made successful exits):
1.) Build a great team and product/service
2.) Make customers happy
3.) Grow your revenue
The rest will come. Sounds easy, right?
AI can generate excitement, but be smart about its use
In a tight market you can “leverage AI to generate excitement” noted another VC. But, the key, in her opinion, was to know how it fits in your company’s vision and objectives and to not just get distracted by the “shiny object” that is AI.
Data as an extra service for your business
Speaking of AI, another VC noted that startups should use AI as not an outward product initially but rather “reflect inward” on how to incorporate AI into your business to make it more efficient. “Think about the data and how you collect that—how can you make it meaningful and monetize it. How can you provide data as an extra service?”
Founders need to understand their vision and path
We know that not every path in business is a straight line (I would love to meet the business that perfectly forecasted its every move because that would be miraculous). However, VCs are looking for founders who know what they want to do and understand, broadly speaking, the path they want to move forward on with their business. Do you want to work for 14 years and move toward an IPO…or, do you want a strategic M&A exit in year five? These are things VC firms look for, according to those at the summit.
When VC isn’t for you
VC money isn’t for every startup—even though a lot of the excitement and buzz around startup businesses has to do with fundraising rounds. I really like what one VC noted: “A lot of people automatically think of VC money when considering building a company and funding it but there are a lot of great companies that have had great exits or are doing just fine without VC money.”Bootstrapping is possible—I’ve seen it firsthand with some clients—but it aint easy. The methods and strategies I use for my clients have either positioned them for acquisition or polished them up in front of investors.
Of course I’d love the chance to talk with you about how PR can boost not only brand awareness, but prepare you for your ideal exit strategy. Let’s talk.