No matter who you are, how much experience you have, or what you sell, fundraising has always been tricky. Throw in a global pandemic to the mix and you’ve got quite the feat.
Where movement is restricted and conversations are limited to phone calls and Zoom meetings, fundraising during COVID can be harder than it has to be. Nonetheless, entrepreneurs have learned to adapt to the current environment and learn new tricks of their own.
Regiment Investment Bank Founder Mike Cavanaugh and Crowdchayne Founder Frank Cid sat with us on our latest DiffuseTap to share their insights about fundraising today and how they learned to adapt to the new normal.
DiffuseTap is a weekly virtual event hosted by Diffuse that is part networking (you’ll meet at least a half dozen high caliber startup players) and part purposeful (you’ll DiffuseTap new ideas). If you want to make new friends and connect with experienced professionals from our VC ecosystem, email us at [email protected]
The hardest part of capital raising today
Capital raising requires you to build a strong relationship with potential investors. Traditionally, building that connection demands conversations you simply could not have over the phone. Because of COVID, however, everything about that has changed, and Mike says that is the most difficult thing to adapt to.
“Capital raising is all about trust. In the past, your ability to build trust boils down to proximity and frequency – how close you can get to somebody and how often you see them. Right now, the toughest thing in capital raising is building trust with new people. It’s harder to meet new people in this COVID lockdown.”
One of the points Mike also raised is “deal fatigue”. He explained that deal fatigue occurs if you offer too many deals to the same group of people – they get tired of hearing from you. To avoid deal fatigue, you have to constantly build new networks and relationships.
This is where things like Zoom conferences, LinkedIn, and other online platforms become a crucial part of fundraising rather than supplemental. According to Frank, ever since the lockdown began he has become more in-tune with technology and online networking – something he didn’t put the effort in before.
“Conferences and meetings like DiffuseTap have been huge for us. When COVID started, I should say I was not very comfortable with the electronic side of things in our business. I’m more of an old-school, pen-and-paper guy. But because of the lockdown situation, I learned how to go out into the digital world and create new relationships, and I don’t think the potential in that will end after COVID.”
Are conversion rates plummeting in the current environment?
At the beginning of the pandemic, it was almost impossible to convince people to invest. According to Mike, there was barely any conversion happening during the first few months of COVID.
“The conversion rate from March to July? Zero. There wasn’t anything moving. I stopped calling in March and April because I knew there were ‘super nos’ coming. After a point, I felt like I didn’t need to hear it… I already knew their answer.”
However, Mike says that results began to pick up as investors themselves have adapted to the environment. After the realization that we were going to be stuck here for a while, Mike says, life began to move forward. What’s important for fund managers is that they have to have a laser-sharp target on their leads.
“I think it really boils down to targeting the people you talk to. They say that in capital raising, if you call 100 random people, only three will know what you’re talking about and have the cash to invest, so you’ll convert about three out of 100. For the most part, that has held true outside of that March to July period where nobody was investing in anything. And remarkably, over the past couple of months it’s been pretty consistent.”
Capital raising opportunities during COVID
The pandemic also comes with new opportunities in the way that more or less, fund managers are forced to think outside of the box. One of those opportunities is investing in international markets.
Because of the increased awareness that people can build strong connections with others in any part of the world today, the pandemic has opened new gates for a lot of fund managers, Frank says.
“Just recently I saw Stripe bought a company in Nigeria for $300 million, and the first thing that went into my mind is ‘man, I got to start looking at companies in Nigeria.’ The world is getting more global, and if investors don’t start looking at that, especially US high net worth investors who are stuck in their own world, they’re going to miss out.”
For better or for worse, the pandemic has brought a lot of interesting things to the table. One, you can build strong connections around the world from your office, and two, there is no point in trying to fight change. The most important skill anyone can learn, capital raising or not, is the power to adapt.
Meet the Speakers
Mike Cavanaugh is an industry veteran with over 20 years of experience in the fintech industry. In 2019, Mike founded Regiment, a digital bank that provides investors and entrepreneurs a platform to find each other through compliant marketplace technology.
Frank Cid has had his hand in a number of fintech firms over the last 25 years. Earlier this year, he founded CrowdChayne, a digital banking platform that provides turnkey equity crowdfunding services for startups and existing businesses looking to raise capital.