It's been a tough year for founders trying to raise capital, unless you're building in AI, but there are still ways to close deals in other industries, one Bay Area venture capital investor says.
Defy.vc partner Neil Sequeira dished out advice for founders during a packed roundtable discussion Tuesday at TechCrunch's annual Disrupt conference at Moscone Center in San Francisco.
Venture capital firms are raising less from limited partners themselves, Sequeira said, but that doesn't mean they aren't looking for deals. Investors are just scrutinizing startups more closely.
"Just remember, it's a unique time," Sequeira said, adding that his firm was looking at both AI and non-AI startups.
"There's lots of great things you can be doing in the market, the bar is just raised on metrics," he said. "Find ways to get VCs to better understand you, and think creatively how to get investors' attention."
Defy is based in Woodside, a community near the VC hub of Sand Hill Road that's halfway between San Francisco and San Jose, and has $713 million of assets under management. Its portfolio includes Aircover, Wealthfront and Mixhalo, a live events service co-founded by Incubus guitarist Michael Einziger.
Here are eight tips from Sequeira about how to raise capital in the current funding environment.
Be prepared to "increase your shots on goal." Venture capital firms are raising less money from limited partners right now, but investors are still taking meetings. It might take longer to land a deal, but investors are looking for companies to back.
Look up securities filings to see which firms have raised recently. Firms often must file disclosure forms with the Securities and Exchange Commission when they raise funds, and also often announce new funds on their own websites. Firms that haven't raised since 2021 are less likely to make deals right now. Find firms that have raised new funds more recently.
Investors are looking for solid metrics. It's critical to have solid metrics like capital efficiency, proven sales and customers. "We can't just bet on purely a good product or a great team," Sequeira said.
Know everything about your competitors. "We want to know why you're going to beat the big incumbent, or why you're going to eat the little startups around," Sequeira said. "Know everything about your competitors."
Talk to venture firm associates. Everyone wants to talk to the partners, and if you can get their attention, great. But associates know their firm's strategy and are good assets. Use them. "Don't forget about associates," Sequeira said. "People often will reach out to me like, 'I don't want to talk to your associates.' Well, good luck. Get in line."
You don't have to be a founder to talk to investors. Venture capital firms like talking to people who work at their portfolio companies, and you don't have to be the founder. Reach out to the investors who have made bets on the companies you work for.
Don't overlook angel investors. That means "somebody who founded a business in your space, somebody who's well connected," Sequeira said. Angels are "a good avenue when you're raising a small round early on."
Build community with people before you need something from them. Get involved in community groups and become part of the social fabric without any agenda. Build in-person relationships. "Doing other things around your kids and your community, it is the best way to get to know people when you don't actually have an ask," Sequeira said. "Get to know people on a human level … Don't underestimate the importance of community."
