When it rains, it pours. The dampened outlook for startup funding at the start of 2022 thanks to the pandemic’s lingering uncertainties has only worsened following a global market downturn and the war in Ukraine.
CB Insights forecasts a roughly 20% drop in total VC investments from Q1 to Q2, leaving ambitious young companies scrambling to fight for scraps.
This slump is a particularly unpleasant setback for entrepreneurs hoping to advance climate-focused principles and social change. It’s becoming increasingly difficult for green companies to raise money for large-scale innovative projects, mainly because most investors still associate “having an impact” with high risk.
More than ever, green startups now need to refine their strategies for raising VC money during the scaling stage, especially when they begin assessing their defining values vis-a-vis their finances. Whether it’s dedicated impact funds or value-based venture capital firms, funders tend to back companies that have demonstrated their ability to scale.
Due diligence is not about checking off boxes or completing paperwork; it’s about creating long-lasting value for you, the portfolio company.
Here are five things green founders should remember when seeking VC funding at this moment.
When it becomes repeatable, you can scale it
Remember the point at which you raised your initial funding? You probably presented a minimum viable product and initial consumer research, and were backed for that.
But the investor climate has changed, and now your business must, too. The next phase isn’t about proving your concept or telling your inspiring founder story — it’s about growing your existing business, attracting new customers and customer segments, and entering new geographies.
All the while, you must show potential investors why they should commit their fiercely coveted money to your scaling efforts.