Last week the Entre community got an inside look at how things have changed in the venture capital space since COVID-19. During our virtual Startup Investor Panel event Michael Marra, CEO of Entre, and Charlie Stephens, of Leaders Live, spoke with Kunal Mehta, a Principal at Hearst Ventures in NYC, Nikita Singareddy, an Investor at PRE Venture and Mario Gabriele, a Senior Associate at Charge VC. Here are some of the key takeaways that entrepreneurs looking to raise venture capital should take note of, especially in the current environment.
1. How has COVID-19 changed the venture capital landscape? What are you telling your portfolio companies?
Nikita says that in most cases, the companies have been impacted in some way, whether it be pivoting, layoffs, applying for PPP, etc. RRE has segmented its portfolio companies based on the need to manage this. Almost every company has had to redo their scenario planning for the year.
Mario says the main message is to “batten down the hatches” because this could be a longterm issue. Founders will need to be lean and nimble to give themselves more runway. This is where the founder’s grit and reliance will come into play.
Kunal says projecting based on several scenarios is necessary right now because of the level of uncertainty.
2. What are some of the best ways to get on an investor's radar?
Kunal says that getting on an investor’s attention hasn’t changed since COVID-19. As a founder, it’s essential to know the investor’s industry focus and make sure you’re reaching out to investors looking for your type of business. To build a relationship with an investor, it’s wise to do your research about some of the investments they’ve made so you can illustrate why your business would be a good fit.
Mario adds that warm intros are a big help if you have a connection to a gatekeeper or someone at one of their portfolio companies. This is an excellent place to start.
3. What's the best way to approach investors when you don't have them in your network?
Kunal says there are many resources online which can help you find the types of investors that would be looking for your type of business. He shared this Google doc and Medium article as a couple of examples.
For cold inbound outreach, Mario says that a short LinkedIn message with a link to your deck would be the best approach. The key is to make sure it’s tailored to that particular investor. In terms of finding investors in a specific area, he says CrunchBase is a good resource for finding relevant funds.
Nikita says she’ll take messages on LinkedIn, Twitter, or email. She says the best format would be to highlight the four things that will make her click on your deck or website. Brevity is important.
4. What are some qualities or characteristics that you look for in a founder?
Mario says that he looks for relentlessly resourceful founders, a term he got from YC. They’re hyper-focused on the problem they’re trying to solve, have a unique insight into that problem, and they’re magnetic.
Nikita adds that a strong quality in founders are when they’re aware of their weaknesses and find teams to fill in the gaps. Another strong quality of founders is when the founder knows the problem they’re trying to solve because they have experience in that space.
Kunal says that they look for what led the founder to the problem. Why are they building the company, what personal experience do they have with it and have they made enough customer discovery to prove that others face this problem? They like to get to the truth early on, so if the founder is humble enough to admit what’s gone wrong, that’s also important.
5. What are some of your networking tips and tricks?
Listening more than you speak is Mario’s biggest advice. Is to create genuine rapport, and it’s helpful to find information leaders so you can filter potential connections based on contacts you already know and trust.
Don’t go for volume but rather spend time nurturing relationships to find a good fit is Kunal’s top tip.
6. What are some of the sectors that are emerging right now?
Nikita says that health care, specifically telehealth and home health, is a focus right now. Also, cloud development, dev-ops tools, cybersecurity, remote work environments, embedded finance, and entertainment, like gaming and e-sports are all industries RRE have their eye on.
Kunal says they’re looking at remote work, gaming, and ed-tech. One thing to keep in mind is looking at where budgets might dry up. For example, if you’re a B2B SaaS company, is your product necessary, or is it something that can your product be cutout in a recession? These are situations where he might lean away for the time being.
Mario is considering the behavioral shifts that may come out of the pandemic when looking for areas to invest. Something he’s been thinking about is religious tech, like methods for streaming services.
7. What's your advice for thinking about valuations during COVID-19?
Kunal believes that if you don’t need to raise money right now, don’t. The market is not in your favor so you may get bad terms. Something to think about is: “what will it take to keep the company alive? What terms are you willing to take to do that?”
Nikita says there are many resources and blogs online for benchmarks to look at, such as revenue and projected revenue when considering valuation.
If you’d like more events like this one, check out our upcoming lineup! We welcome entrepreneurs of all types, start-ups of all sizes, industries, and stages to join us in finding the inspiration, resources, and friends that will make them successful.