Raising Venture Capital in Down Markets: A Guide to Early-stage Funding
In tough financial times, VCs often focus on shoring up portfolio companies rather than investing in new opportunities. But it’s still possible to raise capital—if you refine your approach.
In a bull market, startup founders have many forces at their backs—including an investor outlook that is optimistic and risk tolerant. But when financial conditions get more challenging, as they have in 2022, those tailwinds become headwinds, and raising capital becomes harder. Investors shift their focus to battening down their portfolios’ hatches—typically by directing more funds to their current companies—rather than seeking new opportunities. That means that to get investor attention in a down market, startups looking for early-stage funding need to adapt their tactics.
Regardless of the economy’s direction in coming months, the volatility we’ve experienced in 2022 will most likely affect fundraising dynamics well into 2023 and potentially beyond. While capital raising and startup investing activity has proved resilient so far, the rules for successfully closing a funding round are changing.