How raising money has changed during the pandemic and what raising investment will look like during economic recovery
Pre-pandemic, the economy was expanding. We’d come out of the global economic crisis wounded but wiser, and looking for change. With startups everywhere and SMEs acknowledged for their serious contribution to the economy, things were pretty good. But no one was prepared for COVID-19.
For business, it heralded massive disruption, concerns of recession and a complete change in working practices. Among those changes, and perhaps the most difficult to prepare for, was funding. So, what will funding look like during economic recovery? And how can businesses pitch for success?
What will investment funding look like post-pandemic?
According to Reuters, some global hedge fund investors are optimistic about a rapid pandemic economic recovery. This should mean that the market is relatively friendly to SMEs and startups looking for funding. Although there is some suggestion that you will need to be in the right sector to flourish.
Which industries are receiving most investment?
As well as the core sectors expected to have the most significant comebacks this year – hospitality, travel, retail, construction and entertainment – we’re continuing to see interest in emerging and growth areas.
- Sustainability was one of the hottest investment spheres in 2020, and will continue to be in 2021. It’s a burning issue with masses of potential.
- Online retail also grew enormously in the last year. It and the businesses that serve it – security, payment gateways, software – have been marked as prime investment markets for 2021 and beyond.
- Commodities – not an area that many SMBs are involved in – is expected to realise a big recovery, with a Goldman Sachs analyst commenting; “We see a new bull cycle for commodities emerging in 2021 as demand recoveries meet restrained supply.”
Investors have always placed their money where they think it will grow. As private equity opens up once more, investors won’t just be looking for safe markets, but interesting propositions with the potential to grow.
How should businesses pitch for success?
If you want to secure funding for your business, you need to impress. Not just with your product, but with your business model, your track record, and your acumen.
- Start by researching your potential investors. Find out who is likely to invest in your sector. How much they usually invest. And how involved they are likely to be.
- Evaluate your proposition. If you’re going to secure funding, you need to be sure of what you are presenting. Is your business profitable, or does it have the potential to be? Is it scalable? What is the demand for your products? Do you need to change anything before approaching prospective investors?
- Prepare a pitch deck that celebrates your USP. Let potential investors see how great your product is, and how amazing your business is. But be honest and realistic with your projections, goals, markets, timeline, and vision.
Raising capital after any kind of financial tumult is difficult. For those that can survive without additional capital, holding tight until better times can present a more sensible option. For those who can’t, preparedness is key.