Now is not the time to fundraise. Here’s what you should be doing instead.

“I have 300k of my 500k round soft circled. Soft commitments for the last 200 but would like to fit you in.”

“I’m oversubscribed, but I could talk to my other investors to make room.”

These are actual sentences written to me in actual emails from actual founders in the last two weeks. 

We all can be forgiven for episodes of tone deafness in this crisis, especially when social norms change every few days and we are pushed/pulled by conflicting impulses. Stay home and save yourself. Get back to business and save the economy. 

All that aside, every strategy needs to be adapted to the new normal – and that includes fundraising. Economic activity of every stripe has seized up, including early stage deals, so trying to create the illusion of scarcity telegraphs one of 3 things about you: 

• You have low EQ 
• You comfortably stretch the bounds of truth but are not very good at it
• You are the next Tesla (in which case, I’m sorry I didn’t get back to you, please send me a Zoom invite stat) 

Let’s deal with the fundamental question at hand: Should you try to raise funds during this crisis? The answer is pretty much always no (with a few exceptions), if you can at all avoid it.

Why? 1) No one has any appetite for risk. Unless the crisis actually illustrated why the world needs your product or service, your deal just represents more risk in an otherwise dangerous world. That will change in the next three months. And 2) Every investor will expect the deal to be repriced. We are headed into a recession of some unknown magnitude, and investors will look for that to be priced in. You will get better terms when there is more clarity on whether this is going to be a V shape recovery.

But if your business is almost out of cash, what are you to do? Here are 5 things you can be doing instead of pursuing a raise, and some advice if you have to press ahead with a raise anyway:

1. Step back and build the business. As Robert Herjavec shared, “Funding is not actually running the business. it’s just funding.” The time it will take you to close will not be worth the effort right now. You may end up securing feel good, soft maybes, but then spend all your time trying to convert. That energy is better spent working to fix operational, marketing and other issues you can actually do something about. The better operations you have, the less of the company you will have to give up when you pursue funding. Now may not the right time to raise, but it’s the perfect time to prepare for when it is.
2.  Go into survival mode. How you managed through the crisis will be an asset one day. In a few months, you’ll be able to demonstrate the quality of your decision-making through the first pandemic in a century. Once it’s over, this will become a talking point in your pitch that will impress investors who can compare your decisions to others who did not fare as well. Post-pandemic, every investor is going to want to know two things: Did you survive COVID-19, and did you grow your business? If you can answer yes to both, you will be able to secure capital.
3. Use this time to get in front of your future investors without the friction of trying to close them. Hope is in our nature. Rather than selling, you want to be giving away hope – that innovation continues, that there is light at the end of this tunnel, that good companies will always rise to the top. Start a conversation that turns into a relationship that one day turns into a spot on the cap table. 
4.  Consider an alternative like equity crowdfunding. Just because VCs aren’t likely to invest right now doesn’t mean you can’t get an investment through another channel. My fellow Shark Kevin O’Leary recently discussed his new role as a strategic advisor to equity crowdfunding platform StartEngine, on my LinkedIn Live show. According to Kevin, the benefit of equity crowdfunding is that you create thousands of investors on your terms, raising up to $1.07 million without giving up control or board seats – and unlike VC, its investors are more active than ever before.
5. Double down on what’s working. You can’t just survive; you have to show growth. Identify the opportunities, and lean into them. If your business is not retail-oriented, it’s time to revisit whether you can make a deal with Amazon or transfer from brick-and-mortar sales into online.

Now if you can’t defer, and you need to move forward, my advice is to look at this raise as a bridge round for the next six months. Scale back the size and your expectations, and you’ll be able to stomach a steep discount on a much smaller amount. Besides, nothing wrong with rewarding an investor with favorable terms when they stepped up in the apocalypse. Future risk adverse investors will understand they are not entitled to the same economics.

Of course, none of what I’m saying applies if you have some type of extraordinary leverage that I’m missing, such as very strong ecommerce numbers that you can credibly argue will continue when people vow to never use anything digital again. 

In which case, I apologize for just wasting your time.