Welcome to a BetaKit weekly series designed to help startups and entrepreneurs. Each week, investors Roger Chabra and Katherine Hague tackle the tough questions facing founders today. Have a question you would like answered? Tweet them with the #askaninvestor hashtag, or email them here.
Conventional wisdom states that entrepreneurs shouldn’t try to fundraise for their company in the summer months of July and August. The thinking goes that VCs and angel investors are harder to get a hold of during this time. Also, it’s harder for potential investors to reach people to schedule diligence calls on your company. Momentum makes or breaks any fundraising process, and it can be harder to maintain positive momentum over the summer.
Let’s review this conventional wisdom. First, the data. TechCrunch recently published an article with some great analysis on whether VC funding in the US actually does dry up over July and August. The summary result is that, surprisingly, it does not. We can argue the reasons as to why there is no summer slump these days, but the salient fact is that rounds are getting down throughout the year. This is good news to entrepreneurs who are looking for capital over the summer.
Pre-existing relationships with potential investors are particularly important in summer months.
The best VCs are always on. Venture capital is a much more competitive market than it ever was, and investors know that responsiveness and fast decision-making are differentiators. Good investors are always chasing the best deals and available to speak to you about your company, regardless of the month of the year.
I actually had one founding team I worked with years ago deliberately start a fundraise in the summer because they wanted to see which VC firm would be actively working. They took this as a leading indicator of how value-add the firm would be after making an investment!
If you are in the middle of a fundraise right now, by all means, keep going. As mentioned, momentum in your process is paramount, and you don’t want to lose it. Make sure to plan ahead though. It will be harder to get meetings with investors and you may have to hold multiple meetings or phone meetings in order to help your contact at your VC firm sell the deal to the rest of their partnership. The process may even spill into September when all the partners are back in the office. This is okay, just make sure you keep your contact engaged and updated consistently.
If you are thinking about a fundraise that you are looking to close by the end of the year, my advice is to get started now. Don’t wait until the fall. Fewer companies are out fundraising over the summer and you may be able to more easily get the attention of investors.
There should be no seasonality to your relationship building with potential investors.
Carefully plan your target list and start doing reach out. You should even start some meetings if you can. These meetings may be a simple “Hi, remember me? This is who we are again, I’ll come back for a fuller update in September.” Or they may be full blown pitches. Take the temperature of the target you are reaching out to and customize accordingly.
Finally, as we have said in this column in the past, there should be no seasonality to your relationship building with potential investors. This should be a year-round exercise. It will be much easier to get the attention of VCs over the summer if they know you and your company.
Katherine’s take:
This post is particularly topical for me right now. I’ve started raising a seed round for a new company myself, kicking things off at the end of July. I also just left a coffee meeting with a friend who is in the midst of raising his Series A.
If we are any indicator, summer fundraises aren’t as rare as popular opinion might suggest. Roger is right that getting meetings, particularly full partner meetings, can be difficult in the summer. But as Roger mentioned, investors are opportunistic and always on the hunt for good deals. If an investor is interested they will find a way to get it done.
For me, summer was simply the right time for my business, and after soft circling some early investors and getting a positive response I decided to pull the trigger. Like Roger said, take the momentum and run with it. One note of caution would be that pre-existing relationships with potential investors are particularly important in summer months. Cold contacts are more likely to push your conversation out into the fall, particularly if there isn’t any perceived urgency. Close contacts will make time for you – no matter what time of year it is.
Got a question for the investors? Email them here.
Photo via Unsplash