Being an all-weather investorDawn

There is a lot of noise in the funding market today — from VCs saying they are open for business on the one hand, to startups seeing term sheets being pulled and punitive terms being offered on the other.

Our view is very clear. Wonderful companies are being created all the time and it would be a shame to miss out on their journeys just because it is raining outside. Clearly, there are a couple of tough years on the horizon but we have found that companies forged and succeeding in the smeltery of recession do very well when better times come. A well-battle-tested business model operating in a less competitive startup market pays off in the long run.

Zooming to the present, there are aspects to this change of weather that we really like and hope will persist. For starters, we all seem to have more time. More time for conversations with founders, more time to speak to more members of the organisation, and more time to show what we are about and cement a likely decade-long relationship.

We very recently had a term sheet accepted, and it was refreshing to see that, whilst valuation remains important, it played a smaller part in the partnering process than in the noisy recent past. And don’t get us wrong: we are always looking for reasons to pay wonderful prices for wonderful companies — nobody questions your entry price when you exit a unicorn.

Hence it is with some puzzlement that we hear of punitive terms not seen in our industry for many years being offered to entrepreneurs. Our strong reaction is never to settle for punitive terms; they alone can ultimately undermine the stability of your business. As an industry, we must never underestimate the importance of founders and early-stage investors. Risk/reward can always be discussed and refined; there is never any need for off-market, punitive terms. Your investors should back you and commit to you, not take from you.

We also need to stop talking about investee and investor markets — ‘sellers’ or ‘buyers’ markets. Funding the businesses that are building tomorrow has to be a partnership market — and that is how all high-integrity investors think about it.

For those for whom this is a really tricky time, hunker down and hang in there. If customers are delaying decisions and you’re dealing with a high level of data-free turbulence, fundraising this year might not be possible or advisable. But as soon as those customers emerge from this, your product is solid and your team is set, we look forward to celebrating your successes, whether we had the privilege of sharing your journey or not.

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