Opinions expressed by londonbusinessblog.com contributors are their own.
It’s hard to think of a single industry that hasn’t experienced disruption in the past decade, and the world of VCs and investment firms hasn’t escaped that shift either. How investors evaluate companies and decide which startups are worth financing continues to change. If you are planning to start a startup, or you are already doing it, there are several things you should know before going out into the world seeking financing.
Tech helps connect investors and founders
There has never been a better time to be a founder of where I stand. Everyone is fascinated by the idea of startups and the creation of companies that disrupt entire industries. There is a constant stream of series, movies, podcasts, books and articles, all about the best and brightest entrepreneurs. From a financing perspective, money has never been poured into startups again.
During the first three quarters of 2021, global VC funding grew to over $450 billion† That’s an increase of more than $100 billion compared to the same period in 2020. VCs are investing and newly launched startups are also benefiting. Early stage funding grew by 104% between 2020 and 2021. That means if you’re a new founder, now is the time to start looking for funding.
One of the most significant changes in recent years is that founders now have an amazing array of tools that can help them find funding. They now have access to technical platforms designed to help connect startups with investors. Services like Linqto make it easy for accredited and institutional investors to identify and fund promising mid-stage startups that they might not have heard of otherwise.
They also have access to a host of events and communities designed to help founders find funding. Communities like Fylí and All Raise help women navigate the pitfalls of finding funding, and they’re far from the only examples.
Related: How to Make Your Startup Irresistible to Investors
Social media can be a powerful fundraising tool
The typical route for a startup to get funding is to find investors, pitch them and repeat the process until you get the money you need. that process to workbut it’s not the only way to get a startup off the ground.
In a recent discussion with Priyanka Vazirani and Shannon Almeida at SXSW, we talked about their previous startup before introducing Volv. It was a social start-up designed to help fight disinformation surrounding urgent crises worldwide and their victims. Instead of chasing traditional funding, they decided to reach out to celebrities such as Kerry Washington and Ilana Glazer. They asked them to use their social media platforms to expose misinformation.
This was a quick win for the celebrities, and funds for the Vazirani and Almeida startup started pouring in overnight. If they had gone after VC funding, they probably wouldn’t have received the money they needed to keep the project going.
People are more likely to want to support startups that can have a positive environmental or social impact. Building your startup’s social media presence can help you connect with the right people or increase its profile so investors will want to take a closer look at your offering.
Related: This Secret Weapon Will Convince Investors to Fund Your Startup
Consider your startup’s ESG impact
In recent years, the role of investment firms in supporting companies that raise environmental, social and governance (ESG) concerns has declined somewhat. An excellent recent example comes from Deliveroo. Although the company Raised $1.7 Billion in Fundingit started to collapse after its IPO.
An IPO always means that regulators and the public are scrutinizing your business. In the case of Deliveroo, allegations and fines quickly emerged over the way the company treats its riders. Deliveroo is currently facing cases and fines in several countries. On paper, the company seemed like a good bet for investors. However, those same investors failed to take into account the social and governance concerns posed by the business model.
A recent Amnesty International report spotlights VC firms for failing to do their due diligence regarding the human rights implications of the startups they fund. Recently, an initiative called VentureESG was launched to help the VC industry conduct more widespread ESG analytics for the startups they invest in.
Currently, more than 250 VC firms support the VentureESG initiative. That means there are many investors and companies currently looking at potential investments and thinking, “Is this company’s business model socially and environmentally sustainable and compliant with government regulations?”
As a founder, your job is to eliminate ESG issues by trying to identify potential issues with your business model. Even if you manage to get funding despite ESG issues, the public can be a lot less forgiving when it comes to social issues. To give you an idea, about 50% of millennials and Gen Z consumers are willing to boycott non-environmentally conscious companies. Even if they’re not willing to boycott you, they’ll probably be more than happy to blow you on social media, and that’s Surely not the kind of attention you want as a founder.
Related: ESG Storytelling is important for businesses of all sizes. This is why.
Business strategies, entrepreneurial advice, and inspiring stories can all be found in one place. Discover the new Entrepreneurial bookstore