With increasing competition for capital, founders must take a closer look at investor psychology

Anyone could be forgiven for thinking that we are in a golden era of VC. Every year the amount invested globally reaches new heights. Against all odds, 2020 even exceeded 2019. As private valuations soar, more and more unicorns are created and IPOs provide record returns. VC funds are awash with capital. The buzz around entrepreneurialism grows louder and more new businesses are started every year.

But something isn’t quite right.

Whilst VCs have much to celebrate, not every metric is going up and to the right for founders. The elephant in the room is that VCs are backing fewer…

A ‘guided fundraise’ can give founders the leg-up they need

The transition from raising private investment to institutional investment can be a huge step for any founder. Whilst the ultimate interests of these different investor types may seem aligned, their mindsets and methods are radically different.

For aspiring high growth businesses, the accelerant of institutional capital — most likely from VC funds — is often a necessity. A land grab strategy will require substantial investment in revenue growth well before the business can even think about self-funding. Making the transition to the first institutional raise therefore becomes essential.

These critical ‘first financings’ usually coincide with the start of early scaling…

Founders who are building future growth stories will be in great demand.

VC as an asset class has outperformed in recent years. Investors (known as Limited Partners or LPs) have been piling in as valuations have moved relentlessly upwards. Huge new funds have been raised to support companies staying private for longer and there is a record amount of dry powder in VC coffers.

But these upbeat trends disguise a steep decline in deal numbers, made worse by Covid. Lack of quality deal flow and increasing competition is starting to cause investor anxiety and may pose a threat to the very existence of certain funds over the longer term. …

Understanding 1H20 investment patterns will help founders unlock VC war chests

Entrepreneurs have enjoyed one of the most relentless bull markets over the past decade. Putting aside a few momentary setbacks, venture capital deployed into startups has surged.

Over $1.5 trillion was invested between 2010 and 2019, with most of that coming in just the past few years. On this tide of capital, the global startup ecosystem has flourished.

Then Covid hit.

Nothing would seem the same ever again. But whilst startups have been in turmoil over recent months as funding has slowed, public markets have been booming. …

Startups that shortcut the initial testing phase risk premature scaling.

For many founders, trying to make sense of the impact of COVID on their companies has been a daunting and unexpected task. The earthquake has hit and the foundations of the business have been tested — in some cases to destruction.

As a result, many early-stage companies are in the process of some form of pivot; the cornerstones of the old business model — the target customer segment and the value proposition — look vulnerable. There is a desperate need to quickly rebuild.

The reality is that developing and proving new business models takes time. Early-stage companies rarely process all…

As startups assess their post-Covid purpose, founders need a framework for decision making that will prepare them for the recovery.

The unprecedented nature of the current crisis has created a challenge of unique complexity. Every business has been affected, and so has almost every aspect of normal life.For many startups, especially those that were in touching distance of product/market fit, everything has changed. The business plan that showed the way ahead until very recently no longer applies.

Many early-stage businesses are grappling with a new question that didn’t even exist two months ago: Why is our business essential in a post-Covid world? ‘Nice to have’ is just not going to work.

You know if you have a ‘nice to have’…

A reality check for early stage businesses currently seeking VC investment

This is a deeply worrying time for founders of early stage businesses. In the face of Covid-19 the funding market is going through a hard reset. As a result, companies looking to undertake financing rounds in the coming months are under intense pressure. Some great new businesses will fail if they can’t find a path to capital soon.

To make matters worse, founders trying to navigate this maze are having to decipher conflicting messages. Incumbent investors are telling them to dramatically reduce their expectations of pulling in new investors for the foreseeable future. …

We’re in a crucible of change that will fashion a new cohort of leaders.

Founders are used to managing through periods of uncertainty. But now, as we find ourselves driving headlong into truly uncharted territory, the road ahead seems to have dropped off the satnav. No one has been here before.

A global pandemic is fundamentally changing how we operate, forcing us to rethink our priorities. We believe the destination for our business is still out there somewhere in the distance, but the plan we started the year with can no longer be our roadmap — at least not for the foreseeable future.

As founder/CEOs shift into tactical overdrive — communicating with employees, customers…

The tech and the team matter — but it’s your story that matters most.

When a startup undertakes equity fundraise, company valuation is often a source of much debate. New investors will pitch their offer price as low as they dare and the company will do its best to negotiate it back up.

This cycle will repeat itself many times during the life of the business as new investors join in. It will happen one final time at the point of exit. The process of agreeing to what we might call a ‘fair valuation’ is almost never-ending.

For such a fundamentally important metric, it seems as though there should be some tried and tested…

When product/market fit is elusive it may be time for a a change of direction

Reaching product/market fit is mission critical for startup success. When this remains elusive the strategy needs to be changed, often quickly and dramatically. Some form of pivot is required. In this defining moment, many founders struggle to come to terms with this new reality and act decisively. When is a pivot necessary why do founders sometimes fail the test?

What is a pivot?

In our recent article on premature scaling we discussed the Customer Development Process and the stages of the startup lifecycle.

In the first stage, Discovery, the job is to identify the customer problem and who, specifically, is…

John Hall

Founder & CEO of UK startup to scaleup advisory firm Duet Partners

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