3 min read

Don't slice the mushroom

Don't slice the mushroom
Photo by Dovydas Žilinskas / Unsplash
Morning, partly cloudy Friday
Lithuania Tech Weekly #81
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founder guide

Fundraising (early-stage) 2022

[Thanks Andris and other TP members for reviewing]

The current state of the funding market

  • LT pre-seed funds have not started, and most seed funds have little cash to deploy
  • Valuation corrections are ongoing to follow global trends, gradually cascading through the market from growth stages to Series A to seed
  • Angel investing slowed down (tourist investors going cold)
  • Drop in activity in Europe in summer as everyone reassessing the market
  • Many more startups will be chasing investment in the fall and more competition

The key takeaway is that only better startups will get funding, including startups that run fundraising better. Here are some ideas & processes to follow.

Fundraising process

  • Prepare now better, stand out of the crowd meeting investors in the fall.
    Make it easy to invest. There is plenty of resources, but also really good takes - including how to pitch - are by NFX. Also, bring the right mindset.
  • Keep it tight (run an intense sprint).
    Many startups are around fundraising, going through many events. Now this will get even longer. But being around fundraising long time sends a bad signal. Better to spend months preparing and then try to raise in a limited timeframe (perhaps 6-9 months). If unsuccessful, get back to the startup, make some visible changes (product, team, sales, positioning) and try again.
  • The value of intro is there - do what you can to get connected this way.
    One study in the UK found a warm intro from a mutual connection leads to a 13x higher chance of funding over a cold one.
  • Reduce the risk.
    Remind angels (especially local ones) about Coinvest opportunity. It can have a big play on risk / return calculus.

Venture market

  • Expand the top of the funnel
    Get to talk to many more angels and funds and expected last year.

    Resources: | finding angel investors (requires update but useful links) ventury.app (Baltics focus) | Baltic VCs (Kaari's list) | openvc.app | no-warm intro required | gritt.io | signalNFX | foundersuite |

    In terms of scale, here is the process Martins used to go after 1000 investors.
  • Advisors.
    Never underestimate the value of advice and all benefits that it can bring. It can sometimes help to build an advisory board of some sort - for the network, insights, and support. But be cautious of poor advice.
  • Which funds to go after first - remember funding cycles
    Founders often do not if the fund is actively investing - important in LT when many funds are at the end of deployment. Not much public info but angels will know, who is active and who is not. Also look for newly closed funds, and new investors in the market.