As founders knock on VC firms’ doors this summer, many are finding “closed until September” signs out front. After last year’s fundraising frenzy, there was a cautious Q2 this year. It’s been well-reported that many investors are shutting their laptops and taking long vacations, or taking meetings while at remote locations. We’ve even heard of some LPs asking those flush with new capital to go slow and not deploy until 2023. Allowing investors to take advantage of this reset, wait for better prices, and save for better vintage years.

So what to do if you’re an early-stage founder just about out of runway? If you can’t put off fundraising until 2023, there’s a delicate art to raising money without signaling weakness. In this blog post, I offer founders time-tested advice on how to raise a Series A and get a (good) deal done amid market turbulence. 

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What does fundraising success look like in a challenging fundraising environment? 

The first step to a successful raise in this type of market is to shift your mindset. Accept that this round could take two months to raise versus two days. Even a flat round that takes longer than it would have last year is a success in my book. 

Be prepared to work on your raise for the next month without having a real decision made until September. Gone are the days when you can work for a week or two and close a deal quickly. 

You’ve probably already heard this, and you’ll continue to hear it; a flat round could be the new up round. Many of last year's seed rounds were priced at $100m post or more. Fred Wilson's model broke down why that was (correctly) concerning. Hopefully, you don't need to raise capital just yet but if you do, a flat round for your Series A would be a good place to land. We see most founders' expectations have reset. There was so much seed capital in the market in the past few years that the seed round prices floated up from a historical $10-15m post to $50-150m post in the past three years; it happened so fast and hence expectations went up dramatically with it. I think it’s actually healthy that we are back to some normalcy. YC shrunk its summer class this year and we are seeing founders asking hard questions about product-market fit and talent growth. Gone are the days of telling new companies that “everything will be fixed with fundraising”.

If you can shift your mindset going into raising a Series A and show, not tell, why you are the founder to bet on even in economic turmoil I believe you’ll find the right VC to partner with. 

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Could raising capital this summer signal weakness?

Yes. Half of the companies raising right now are running out of money and don’t have another option. The other half don’t need to raise yet but are using this time to have conversations and build relationships, knowing they will have to raise next year. When you reach out to investors, they don’t know which one you are. Keep that in mind and remain confident during conversations.

In the tech start-up ecosystem, it's healthy to be a contrarian. While everyone's out on vacation, there are actually many investors and VCs working and interested to meet up. Canvas is one of them. We have always been steady—we didn’t get wrapped up in the craze during the boom last year and we aren’t shutting our laptops now during the bust. My partners and I are staying open-minded and we recommend you seek out investors who are doing the same.

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What are investors looking for in companies right now?

In my experience, during an economic recession and market uncertainty, investors want to see that you are building a product that saves money, especially when it’s needed most. Highlighting how a product can offset costs increases your chance of getting funding right now. 

Also, we are definitely seeing investors pivoting away from growth. For five years, it was growth at all costs. We have entered a period where if you can responsibly grow at 60%+, it is better than incinerating money to drive 200% growth.  

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Are you taking calls from founders this summer? 

Yes. Taking the time to have conversations means that much more to people in uncertain times. In an environment where capital is more scarce, not taking time off can be an advantage for both founders and investors, allowing them to have more meaningful conversations. 

For founders,  it is smart to take a few calls now, as opposed to the classic line of "I am heads down." I chuckle when I hear those responses. Don’t assume the market will rebound fast and furious in October and that things will go back to the same frenzied pace as before. The truth is we are likely going sideways for the next two years in the private market. Capital won't be easier to raise this fall. In the coming months, every fund faces the reality of a valuation reset of investments in their current portfolio and will have to triage which investments they need to support internally with inside rounds. 

And that brings me to an important point: if you must hit the market soon, make sure you have an internal term sheet. Go to your insiders and ask for an extension round now or support you with an internal round so you can "upsize it" to include outside capital. That signals strength and creates competition for your process. 

To learn more insights on fundraising and what it takes to really grow an early-stage company, follow me on LinkedIn and subscribe to our newsletter.