Fall is nearly upon us. And for founders, that means venture capital investors are returning from vacations and (thankfully, it looks like finally) the Burning Man festival. But even with VCs back at work, some investors believe founders should buckle up for a rather arduous fall fundraising season.
Raising capital in prior years has been “very much a sprint,” Sarah Kunst, managing director at early-stage firm Cleo Capital, which focuses on pre-seed and seed companies, told me. By contrast, “Right now, we are 1,000% in marathon territory.” She points out that founders need to understand the bar is higher for prospective investments, and it’s a trickier time to fundraise. But, Kunst hopes founders won’t lose faith: “Don't be discouraged by that. It's just sort of where we're at right now.”
Others like Eric Bahn, general partner and cofounder of Hustle Fund, are taking a more upbeat view: The fall is “my favorite time for founders to fundraise,” he says. With VCs now back from vacation, “I think a lot of them are just excited to do some deals.” He says they’ve been advising their portfolio companies to hold off kickstarting the fundraising process until this post-Labor Day window since he believes it's "going to be strong.” Practically, Bahn says this is the week founders should be thinking about their fall fundraising process and getting things in order; next week, they should aim to get introductions to investors done; and, ideally, have initial meetings finished by the end of September.
Founders should prep a thorough pitch deck, and Kunst points out that VCs will likely be a lot more rigorous this year: She recommends having a whole data room built out, and to “expect that people are going to ask to see your entire deck before taking the meeting,” adding VCs may want to do things like conduct more customer interviews, she points out. Bahn suggests founders write a blurb about their company that can be forwarded along with an introduction to VCs. In all, Bahn says founders should aim to reach out to at least 100 VCs, which could include angel investors if they’re an early-stage company.
Of course, founders’ ability to raise funds this fall depends a lot on the stage of their company, their metrics, and, of course, the sector. (It should come as no surprise that you’ll probably have an easier time if you’re building an artificial intelligence startup.) Companies in the later stages—Series B and above—may struggle securing funds, Bahn notes, as those stages have been especially hard-hit this year. And they were more often saddled with higher valuations during the frenzied days of 2021.
The good news is VCs still have cash to spend, and many of them have been telling me this year that those stand-out companies will be able to snag dollars.
But the upshot? It sounds like “perseverance” should be the watchword for founders this fall.
Arm IPO update: In case you missed it, the U.K. chip designer said in a filing on Tuesday that the firm plans to price shares for its hotly-anticipated IPO between $47 and $51 per share (because it’s a foreign company, Arm will sell American depositary shares, or ADSs). That could value the company at over $52 billion. If the SoftBank-owned firm is able to pull off the upper end of the share price range, it could raise around $4.9 billion for the 95.5 million ADSs it plans to sell. And there are some Big Tech buyers lining up: Companies including Apple, Nvidia, and Samsung are all interested in investing in the IPO. SoftBank will retain about 90% of the company after its expected debut later this month. But, notably, Tuesday’s price range would be lower than previous reports indicated (of up to a $70 billion valuation). “The lowered price range relative to the initial target shows that investors are exercising caution in assigning expectations for A.I. growth,” Brendan Burke, an emerging tech analyst at PitchBook, wrote Tuesday.
Sequoia's investor concerns: Venture capital firms are no doubt facing more scrutiny from their investors now that the frenzied days of 2021 are well behind us. And storied firm Sequoia Capital is now dealing with questions over some of its moves, including a disastrous bet on disgraced founder Sam Bankman-Fried’s FTX that went to zero in 2022, and the firm's decision to decouple from its China arm amid political tensions, according to a new Financial Times deep dive. And some of the big changes have apparently sparked concerns for some of the firm’s LPs, the FT reports. You can read their story here.
See you tomorrow,
Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.
