#AdviceColumn: Should Founders Be Fundraising During This Pandemic?

It's feasible, but it will be challenging, and it really depends on the kind of business you want to start. Long before this crisis, I always advised entrepreneurs to pursue organic funding: start out small with low overhead, grow your client base, focus on the work, and put everything back into the business so that you can grow it healthily and sustainably. It demands a lot of work, but it also frees you from having to rely on outside funding. If your circumstances allow it, this is, in my opinion, the best way to start a business (it's how I started mine).

That said, for many startups, other funding options will be necessary. For reasons having nothing to do with the pandemic, venture capital was already far more suspicious of startups that don't have a clear path to profitability in their prospectus, and the current crisis American capitalism is experiencing has only reinforced that newfound conservatism.

I always advised entrepreneurs to pursue organic funding: start out small with low overhead, grow your client base, focus on the work, and put everything back into the business so that you can grow it healthily and sustainably.

The last few years and the felling of companies like WeWork and Theranos have made it much more difficult to get funding for a big ambitious moonshot with only a lofty dream and a model, but no viable business plan or sound financials (something that was already less likely for women founders). The question is no longer, "What's your exit strategy?" but rather, "How will investing in your startup strengthen my long-term?"

Now, all of that out of the way, the fact that this is a risk-averse market doesn't eradicate the ambition that many venture capitalists harbor for the big payout; it just makes it harder to justify. But the upside is that it demands you to be better. To think through your business plan ahead of time. Now is a very good time to perfect your plan and your pitch and be ready to hit the ground running.

I won't throw numbers at you, but when it comes to securing VC dollars, women-led startups have always had a tougher fight, which is why considering other funding avenues is a good idea. Some businesses, for example, may have more funding success through equity crowdfunding.

Now is a very good time to perfect your plan and your pitch and be ready to hit the ground running.

This will be a bit different for businesses that emerge to fill the glaring gaps that the pandemic has opened up. I would anticipate funding to be more available, for example, for startups that cover critical healthcare or service gaps that have emerged since lockdown started. I keep thinking of the need to bring medical equipment manufacturing back to the United States, how overwhelmed grocery delivery services have become, the lines stretching outside the retail operations that are still open, the shortages and supply-chain disruptions we're facing, and even the future of film distribution; all of these are potential profit opportunities because these are problems we didn't know to expect, which means service is still catching up. There are countless more, and an enterprising mind that finds a way to alleviate these pain points is going to find eager money.

I expect that the post-coronavirus world of venture capital is going to double down on its present investment conservatism, including for existing startups. I am especially worried about startups promising things that they can no longer guarantee. What's a dating app, for example, in a world where we're reluctant to meet? So, I expect that keeping funding incoming is going to have two primary requirements:

As I mentioned in the today's first question, nobody wants to be caught on the hook for another WeWork or Theranos, companies utterly dependent on continual investment to maintain cashflow while failing to deliver or turn meaningful profits because the risk of collapse – especially with "visionary" founders – is too great. So being able to show that your company is a strong investment for the long haul is going to be more critical than ever.

We have no idea how long this will last, so we can't necessarily anticipate how far away we are from a post-pandemic economy, and even then, the psychological effects of this experience will continue well into the future in one form or another.

But the second requirement is even more critical: Does your product still make sense in the post-pandemic economy, and if not, how can you make it make sense? I mentioned dating apps above because no comprehensive pandemic dating solution has emerged and finding a way to ensure people can meet and couple safely is likely going to remain a demand for some time.

We have no idea how long this will last, so we can't necessarily anticipate how far away we are from a post-pandemic economy, and even then, the psychological effects of this experience will continue well into the future in one form or another. I think about how people who lived through the Depression retained, for decades afterward, Depression-related habits from mistrust of banks to saving every ounce of grease and oil they can.

That's going to have knock-on economic effects, especially in terms of what your customers may want or need from you. Preparing for the future means coming to understand who your customers are rather than who they were, what their new pain points are relative to the service you offer, and solving those. In other words, you will need to be adaptable.

Preparing for the future means coming to understand who your customers are rather than who they were, what their new pain points are relative to the service you offer, and solving those.

That, more than anything, is what VC is going to want to see from their existing investments: a practical demonstration that they will not be throwing their money away by continuing to support you.