How to raise funds in times of crisis?

Property markets, especially commercial real estate, will for sure be severely affected by the crisis, which means this huge business area will have to undergo transformation. It will change how people work, how the spaces are managed, how to get more efficiency and deliver new KPIs. Here the PropTech startups for sure can help. Now more than 3.500 proptech companies are successfully operating in Europe. Sector is on the rise, yet PropTech startups as many others face the daunting task of raising investment.

Last week Alexander Tkachenko, CEO and Founder of VNX, and Managing Partner of 2be.lu VC fund, joined the Relevation – the digital fundraising summit which gathered the brightest minds in PropTech. Alexander shared his thoughts about the current state of the fundraising both from the VCs’ and entrepreneurs’ perspective and told how to raise capital in times of crises.

Here we prepared the key takeaways from his keynote: 

• The pandemic has shifted investors` focus 

It’s a great difference to raise capital before the Covid and now. Lots of founders felt  that “the winter came”, leads and conversations suddenly go cold and attitudes shift dramatically. But not all startups are the same, some categories are severely affected, but some benefit. We can still see a great demand from VCs in such sectors as delivery services, telemedicine services, etc. 

From the VCs perspective, all the attention is now focused on the current portfolio companies. A lot of time and efforts are going to sort out “living” from “the dead” in the portfolio and rescue those which are going to survive. So that’s why there is much less capacity to look after new deals, but still VCs are trying not to miss good opportunities. There’s still lots of brilliant companies with fantastic teams which can be found with a reasonable valuation.

• Getting a check has become more difficult

Investors haven’t stopped funding, they are searching for good deals but cutting checks. Funding goes to the opportunities that stand out and that are expected to offer the best return. Investors don’t necessarily prefer more mature companies, although if you already have capital it’s easier to show the results. 

There are three main things for entrepreneurs to keep in mind during the crisis. First – the cash is a king, so preserve it if you can. Second – the fundraising process will take three times more time and effort. Founders should understand that they will be fighting for smaller attention, smaller pot of money and it will be harder to get it.  And the third – you have to be bold to go through the crisis, this is an extremely valuable experience. 

• Alternative funding might be a solution

During the crisis VC investors are typically too busy and angel investors are a bit wary about committing the capital, alternative financial and using the platforms like, for example, VNX could be an opportunity. Now more than ever, digital investment platforms can be helpful to link companies seeking capital with potential investors. 

The general advice to the companies and founders is to identify a lead or cornerstone investor especially for the early rounds, this will help to close round quicker and attract other investors.

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