Are you struggling to raise funds during this pandemic? Yvonne shared her expertise and what entrepreneurs should do during this time to get funds from VCs. She has invested over £200 million in a wide range of startups across Europe, the Middle East and Africa. You will discover how to develop your strategy as well as approach VCs to raise investment during this pandemic.
Yvonne’s journey in the world of VC
Yvonne started her career in banking at Goldman Sachs, but very early on, she realised that banking wasn’t for her. She embarked on a career in strategy consulting before she caught the entrepreneurship bug and decided to enter the world of venture capital. Her first investment role was at the Japanese investment giant, Mitsui where she was responsible for corporate venture capital activity across Europe, the Middle East and Africa. Although she felt a little bit out of her depth when she joined as a senior investment manager, she jumped at the opportunity. She advises anyone to take chances where they make sense even if you do not feel 100% read.
In 2019, she decided to join Impact X, a UK based venture capital fund that invests underrepresented entrepreneurs. Now, as a principal at Impact X, she is investing in companies led by exceptional underrepresented entrepreneurs.
How should entrepreneurs raise investments in this pandemic?
Yvonne’s shared five tips for entrepreneurs looking to raise capital:
1. Be transparent
One of the key things during this period of uncertainty is transparency. Investors are interested in knowing how the business was doing before COVID and what the company is doing to get through this pandemic. For example, if revenues go down by 30%, entrepreneurs have to be transparent about it. Investors are going to understand that in this environment readjusting your assumption may be required so don’t be afraid to share any challenges you may be facing.
2. Understand your competitors from a broader perspective
Some of the critical mistakes that entrepreneurs tend to make are, surprisingly, claiming that you don’t have any competition. There will always be some level of competition. A great example is Uber. When Uber started, there were several taxis services which were their competitors. At that time, there wasn’t many other tech-enabled taxi services, but that doesn’t mean they didn’t have any competitors. Yvonne is always surprised by the number of competitors that she can identify on Google search, but they have not been mentioned in the meetings with entrepreneurs.
You have to research your field thoroughly and be prepared to discuss the competitive landscape before presenting it to a VC.
3. Show that your products are in demand
Proving your products or services are in demand in the market is vital. A tech company called Marshmallow won Yvonne’s heart just because of their knowledge of the market and their clear traction. The company has only been operating for a short period. However, they have been able to prove that their products are needed since they are trying to tackle a real problem. Marshmallow provides insurance to immigrants and migrants. Typically, the rate of insurance offered by the incumbents is much higher. It’s because they don’t use additional data points, unlike Marshmallow. The company made the proposition very clear and showed that there was a real demand for their product, which was why they successfully attracted the investor.
4. Have a great team
The team’s ability to navigate in the current environment impressed Yvonne
Having a great team is imperative when raising investment. Investors are looking for a team’s ability to withstand a crisis. During this period, in particular, the team’s ability to navigate in the current environment impressed Yvonne. Some of you might hear that people tend to invest in companies or startups which have more than one founder. There are exceptions, but it helps to have a co-founder when times get tough.
5. Being passionate
Being transparent, knowledgeable and having a great team is vital. But, the most fundamental point is how passionate you are. Venture capitalists invest in a company for the long term. They want to make sure that an entrepreneur is in it for the long term so show your motivation and make it clear why you’re doing your business, why you are able to win and why now.
Do founders have to change their business operation? What are the things they should look at?
Ultimately founders need to pivot for two reasons: When something isn’t quite right with their model, or external influences forces them to rethink their operations such as a financial crisis.
For many companies, moving quickly to adapt to this current crisis is really a matter of survival or completely perishing. Even if your company is not doing too badly in the immediate aftermath of this pandemic, every company should be thinking about how can you ensure that you are well-positioned to monetise your products. If you weren’t previously monetising your products, you have to ask yourself, ‘are there ways in which you can monetise your product?’. The net burn is key in this environment.
Another thing you need to rethink is focusing on your specific strengths. Make sure that you’re taking calculated risks. If you’re thinking about shifting into a new area, make sure that it’s something that makes sense for you.
Core Music adapted to the situation from enabling people to book musicians for events to switching to a marketplace for recording music messages, since there were no events taking place. This company now enables musicians to generate an income irrespective of the fact that events are no longer taking place. Core Music is an excellent example of how the company has adjusted its business model, finding out a way to monetise their service given the environment change. At the same time, they are also keeping their users engaged. Consumer-facing businesses have to think about how to keep their customers involved during this pandemic even if they are not able to provide a service that the company was able to offer initially.
Don’t stop communicating with them, otherwise, they will forget about you!
What is the best way to approach VCs in this situation?
Generally speaking, the industry always prefers warm introductions; however, if you have to send a cold message, make it clear, concise and relevant to the VC you are reaching out to.
A lot of entrepreneurs don’t think cold emails are worth it, but it is. One of the great things about this pandemic is everyone’s at home. This means that people are checking social media more and are more willing to have a conversation with you.
For example, if you’re a founder and you have a 12 to 18 months runway, you should use that as your advantage to build relationships with investors for your next round. It may be that you say, ‘hey, can we have a chat for 10 minutes, I’d love to get your advice since you are investing in a company operating in the same industry as me’. And before you know, that advice could turn into a fundraising conversation. Yvonne had a conversation with an entrepreneur using this approach. After the webinar she organised, an entrepreneur reached out to her, saying ‘Something you said resonated with me, and it’s related to our business. Can I hear your thoughts on our business?’. She was more than willing to have that conversation because she liked the fact that they’d listened to her chat and found it interesting. Now she is exploring their business.
What underrepresented founders should do to get investment?
As mentioned in Yvonne’s background, there are huge disparities in investment. In the past, many VCs only invested in their networks, such as individuals that were similar to them. It’s common for an individual with an underrepresented background not to resonate as much as you would with an individual such as Yvonne. Also, a lack of access to the right network was a problem. This is one of the reasons why Impact was founded and focused mainly on those underrepresented founders. She hopes that in 10-15 years, we’re no longer talking about underrepresented founders.
How should entrepreneurs bear themselves after this pandemic?
Entrepreneurs should be mindful of the fact that fundraising has slowed down and LPs have been facing challenges themselves. You perhaps need to expand a way to try to raise for a period of 18 – 24 months to weather the storm.
It has been a difficult time for many businesses. However, companies do continue to grow and scale-up during any financial crisis. Airbnb and Uber are great examples of riding on the wave of a shift in consumer behaviour that emerged from the financial crisis. It’s about digging deep and identifying new potential opportunities.
About the speaker
Yvonne Bajela is a Founding Member and Principal at Impact X Capital, a UK based venture capital fund founded to support underrepresented entrepreneurs. Over the last five years, Yvonne has invested over £200 million in various startups across Europe, the Middle East and Africa. A board member and passionate leader, Yvonne is a champion for diverse entrepreneurs and a World Economic Forum Global Shaper. You can reach out to her on Linkedin, Twitter, Instagram (@YvonneBajela). Also visit impact X0