Early-Stage Cross Border Fundraising in COVID Times (Is it possible?)

A short and quick answer to this is, Yes!!! However, it is not easy; a few critical matters make international early-stage fundraising more difficult but not impossible; most companies will benefit from help. This post will discuss the issues that organizations must deal with and how they can best surpass them when trying to raise money from international sources. 

To find international capital before you reach a unicorn status, it is essential to think like an investor. Venture Capital (VC) has traditionally been a local industry.  Why is this? Investors have historically avoided foreign markets due to the geopolitical risk, cultural and linguistic differences, legal or administrative red tape, the general lack of knowledge about other economies, local mentality, and inability to evaluate company’s founders’ background and experience.  However, as Venture Capital from Silicon Valley to Shenzhen becomes more numerous and savvier, investors are pressured to differentiate themselves by looking abroad.  The world’s best companies are blossoming out of Asia, South America, and Africa at nearly the same rate as the US and Europe. Investors have realized that we are moving towards a truly global economy with innovation happening on a worldwide scale. 

Investors want to have confidence in any investment.  With international investments, funders are not only interested in the risk vs opportunity, ongoing performance, and potential of a company, but they also have to be sure that the additional issues, geopolitical and cultural, and red tape that come with foreign investment will not be a problem.

As a company searching for a new round of funding, a founder also has similar concerns. A company wants to make sure that the investor it is going to work with is the right fit for it and its business. Just because they have the amount a company is searching for does not mean that they are the right investor. There must be a symbiotic relationship between a company and an investor that goes beyond funding. 

This is where the third-party intermediary is most beneficial. You want to find someone who can support you in your due diligence, finding the right relationship match. This third party can be an advisor or consultant or an investment banker with years of experience working with international funders and access to the important information to ensure success.

With start-ups, several things are difficult. An entrepreneur might have experience in many aspects of the business, but the funding side is a whole new beast. Just as tricky as it is for foreign investors to analyse the business and entrepreneur’s experience, it may be just as difficult to do the due diligence of the VC fund or private investor. Not all the big-name VCs will be the right fit and trying to reach out to them is nearly impossible if you don’t have a warm introduction that comes along to help tell your story and let you make an excellent first impression. 

One of the banker’s jobs is to already have the experience to anticipate many of the issues that will come up and have the resources to best navigate them.  Few companies searching for international funding will have any experience with this issue, which means they must rely on the investor to find the inevitable problems that appear and then devise a solution. If the barrier is too high, this can result in missing out on this funding if the investor backs out.

With Covid, there are new problems that have been added to the search for international fundraising. The biggest hurdle is the travel restrictions that come up with every new variant and the wave of infections accompanying them. These are just additional obstacles that have been created but nothing that can not be surpassed with the knowledge and experience of a professional. Technology is the primary solution allowing video conferencing to take the place of in-person meetings and electronic correspondence to take the place of legacy paper contracts. There is no barrier too high that can not be surpassed with the right people in your corner.

 The time, money, and headaches saved by using a professional to introduce you to the right companies and lead you down the path to successful funding are well worth it, allowing you to focus on your business and do the things that you do best.