"Can I raise finance during the coronavirus pandemic?"
Money most certainly does not buy happiness, but it does make the world go round. And the lack of money can lead to hardship in many ways. A question that I keep overhearing recently is about whether it is still possible to raise finance during the coronavirus pandemic. The simple answer is yes… maybe!
Let me explain. Over the lockdown period I have spoken to many early stage businesses as well as with crowdfunding platforms, business angels, family offices, and VCs. These conversations have been more anecdotal in style rather than a formal survey, but nevertheless they have enabled me to gauge what is possible, and therefore put me in a good position to answer this question.
As regular readers will know, my recent articles have covered many different aspects of doing everything possible to ensure that your business will survive the coronavirus lockdown. Some of those articles have talked specifically about what types of business and sectors will benefit and which will suffer the most, and others have talked about raising new funding as a way to survive.
Raising new equity finance in the present situation is still more than possible, but only of course for those businesses that operate in sectors that are viable, and if the business itself has a strong future post lockdown.
From crowdfunding platforms to business angels, and from family offices to VCs, all are still interested in investing in the right businesses with the right story. Let us look at these on a more individual basis.
Crowdfunding platforms seem to have almost the same level of interest from investors, but a lower level of businesses actually on the platforms. This can mean that it is easier for those businesses that are represented, as there is less competition for the available funds. However, it is of course true that for many businesses that would normally be raising finance in such a way, now is not the best time to try depending upon the specific enterprise.
Business Angels, and to a much greater extent family offices, are also still active in many cases, but this depends largely on what other investments they hold and how much cash they have access to. Some are nursing their wounds and shoring up investments already made in existing companies, but many others are still keen to look for good business opportunities and new investments in these difficult times.
Venture Capital firms are similar to the situation described for business angels and family offices but with one very important additional factor. That factor is when each particular VC last raised funding and how much pressure they are under to invest that funding. There are a significant number that have relatively recently raised funding and are actively seeking to invest. These VCs see the potential in this market as valuations have reduced somewhat in a number of cases and they see increased opportunities to invest in the right companies on better terms. In addition, there is a degree of pressure to continue to invest at the same rate as before in order to maintain their overall return on capital, rather than have large cash balances that are earning next to nothing in these low interest rate times.
Make no mistake, for some companies, raising funding in this climate will be impossible, but for a large minority of others life continues as it always has, and because there is less competition from other companies it can indeed be easier than in more normal circumstances. As with many things in life much of this can depend on luck, but there are still many ways that each of us can influence our luck, good or bad.
If you are not in one of those industries or sectors that has been hardest hit by the coronavirus pandemic lockdown there is still the possibility of raising finance. So do all that you can to influence your own luck and investigate properly the benefits of raising finance in whatever form works best for your business.