Here’s a scenario: Your company has just received a generous infusion of cash. In addition to breaking out the champagne, you’re eager to break out the news releases, celebrating your windfall and hopefully attracting some positive news coverage in the process.
Take a breather. While it may seem like all funding news is good news, private markets are starting to feel the heat of the numerous instabilities in the world right now. There are geopolitical tensions in Europe. There’s record-breaking inflation globally, which was just followed by unprecedented interest rate hikes. And the pandemic, which is now dragging into its third calendar year, continues to wield its influence on the global economy.
In some ways, we should be surprised that it took this long to feel the impact. Last year was a record-breaking one for global venture funding, and 2021 saw more unicorns created than ever before. After raking in just $335 billion in 2020, global venture investment funds shot up more than 90 percent in 2021, and closed out the year with $643 billion in their coffers.
But all joyrides must eventually end, and 2022, say venture capitalists, is shaping up to be the denouement to last year’s exciting funding drama.
Does that mean that if your company earns an investment, you shouldn’t celebrate? Of course you should! But it does mean that in a time when the pace of cash injections is starting to slow, companies should be strategic in when they announce their good fortune, and consider the lens through which they’re valuing the news.
Large firms like Tiger Global and D1 Capital have begun pulling back on late-stage investments. And it’s not just late-stage growth that’s being affected. Series A and Series B funding rounds are also starting to shrink. At a time when funding is likely to be both smaller and slower, you may want to hold out until there’s a second investment to add to the news release, or even a third. Funding rounds that used to take weeks might now take months, and you’d be selling yourself short to try and increase the pace in a desire to get a jump on announcements. You should also assess how your round looks compared to your competitors and other companies in your space. If most companies have mega rounds and yours is relatively small, your announcement could imply that your company is far less mature in comparison.
Things are tough out there. So play the long game, and practice patience. It will likely pay off — in dollars as well as sense.
When it comes to mapping out a timeline for funding announcements, sooner is not always better. The strategy must be weighed on a case by case basis and the larger news cycle must be taken into account as well.