What New Founders Need to Know Before Seeking Funding In Today’s World

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It’s hard to think of a single industry that hasn’t faced disruption in the last 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 funding keeps changing. If you’re planning on launching a startup, or you’re already in the process of doing it, there are several things you need to know before you go off into the world to seek funding.

Tech is helping pair investors with founders

There’s never been a better time to be a founder from where I’m standing. Everyone is fascinated with the idea of startups and creating businesses that disrupt entire industries. There is a constant onslaught of series, movies, podcasts, books and articles, all discussing the best and brightest entrepreneurs. From a funding perspective, there’s also never been more money pouring into startups.

During the first three quarters of 2021, global VC funding grew to over $450 billion. That’s an increase of over $100 billion when compared to the same period during 2020. VCs are on an investment roll, and newly launched startups are also benefiting from it. Early-stage funding grew by 104% from 2020 to 2021. That means that if you’re a newly minted founder, now is the moment to hit the ground looking for funding.

One of the most significant changes during the past few years is that founders now have an amazing array of tools that can help them find funding. They now have access to tech platforms designed to help pair startups with investors. Services such as Linqto make it easy for accredited and institutional investors to identify and fund promising mid-stage startups they might have never heard of otherwise.

They also have access to a host of events and communities designed to help founders find funding. Communities such as Fylí and All Raise are helping 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 vehicle

The typical route for a startup to get funding involves finding investors, pitching them and repeating the process until you get the money you need. That process works, but 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 launching Volv. It was a social startup intended to help combat misinformation around 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 help shine a light on misinformation.

This was a quick win for the celebrities, and funds for Vazirani and Almeida’s startup started coming in overnight. If they had gone after VC funding, they probably wouldn’t have received the money they needed to keep the project running.

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 raise its profile, so investors will want to take a closer look at what you’re offering.

Related: This Secret Weapon Will Convince Investors to Fund Your Startup

Consider your startup’s ESG impact

The past years have seen some pushback on the role of investment firms in backing companies that pose environmental, social and governance (ESG) concerns. One excellent recent example comes from Deliveroo. Although the company raised $1.7 billion in funding, it started to collapse after its IPO.

An IPO always means that regulators and the public will take a closer look at your business practices. In Deliveroo’s case, accusations and fines for how the company treats its riders quickly began to emerge. Currently, Deliveroo is facing cases and fines against it in several countries. On paper, the company seemed like a sure bet for investors. However, those same investors failed to consider the social and governance concerns that its business model raised.

A recent report by Amnesty International places VC firms in the spotlight for failing to do their due diligence on the human rights implications of the startups they fund. Recently, an initiative called VentureESG was launched to help push the VC industry towards more widespread ESG analysis for the startups they invest in.

Currently, over 250 VC firms support the VentureESG Initiative. That means there are a lot of investors and firms who are currently looking at potential investments and thinking “Is this company’s business model social and environmentally sustainable, and does it meet government regulations?”

As a founder, it’s your job to ease ESG concerns by trying to identify potential issues with your business model. Even if you do manage to get funding despite ESG issues, the public can be much less forgiving when it comes to social issues. Just to give you an idea, over 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 blast you on social media, and that’s definitely not the kind of attention that you want as a founder.

Related: ESG Storytelling Matters to Companies of All Sizes. Here’s Why.

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