Financing
July 3, 2022

Want to raise funds during a bear market? Here's how

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Rising interest rates. The tech rout. Market instability. Stagflation or inflation? It depends on who you ask. For Founders, raising start-up funding just became a lot more complicated. 

The pandemic, followed by a supply chain crisis, increased prices for fuel, raw materials and basic necessities. Now, a series of geopolitical crises have driven widespread uncertainty about the global economic outlook. This, in turn, has made bankers, public equity brokers and private investors increasingly skittish.  

The era of easy and (relatively) free money may be over, but investors are still out there, and start-up funds are still available. It is a different game today than it was six months ago, but one that is still well worth playing. If you're looking to raise funds for your start-up, here's how to do it. 

The current start-up funding climate for Founders

Just a few months ago, Founders could easily and quickly access start-up funding. In fact, venture capital investment in global start-ups in 2021 nearly doubled 2020 investments. However, those days, while not entirely gone, are definitely less heady. Far fewer start-ups are weighing multiple options for funding. Multiple add-on rounds and 100x valuations are also seeming like a too-distant dream. 

Global venture funding dropped to $160 billion in Q1 2022, a 13% drop from the $184 billion entrepreneurs raised in the final quarter of 2021, according to Crunchbase. However, despite this somewhat gloomy data, Crunchbase analysts also point out that while the venture funding market in Q1 2022 was not as strong as the three previous quarters, it is on par with the first quarter of 2021. They suggest that this trend does not indicate a decline to pre-2021 in the amount invested. 

That's the good news. 

While KMPG expects the venture capital market to remain steady, they also warn that deal-making will slow down significantly while investors focus more closely on due diligence. The consulting firm also believes these investors will focus on late-stage financing, freezing out start-ups and staying away from initial funding rounds.  

Here are the eight strategies you can take to attract initial investment and secure funding, including eCommerce funding.  

Hold on to your equity 

If you do secure funding, hold on to your equity. For Founders, equity retention translates to increased power and control, but more importantly, it is leverage they can use in later funding rounds. This can be critical in getting another round of financing to get through difficult times or scale your company when it's ready. Retaining your equity means stability for you and your business. Remember that you are not just positioning your company to survive the current economic climate. You also want to position it to be ready to take advantage when the economy turns around, as it inevitably will. 

In 2022, savvier business leaders are likely to opt for revenue-based financing over traditional financing methods, according to Michele Romanow, president and co-founder of Clearco.

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