According to CB Insights global VC funding dropped by 34% QoQ as of Q3 2022, hitting a 9-quarter low! In Canada, the numbers were even lower with funding dropping by 65% while deals fall 19% QoQ. The total funding for Q3 reached $700M, with a total of 143 deals. With funding drying up, more startups are hitting the brakes on hiring or alternatively are “right-sizing” their teams.
New Net Jobs
Here in Atlantic Canada, the startup ecosystem saw only 16 net new jobs in Q3. That brings the total number of employed by the sector to 13,194. Of the companies that I’m tracking 20% hired employees, 58% had no change and 22% had less staff than in Q2.
According to CB Insights global VC funding dropped by 23% QoQ as of Q2 2022. It does appear that deals in the region are still getting done, but this pullback is starting to creep into this region. It seems every day we hear from more entrepreneurs about how challenging it is to even get meetings with investors outside of the region.
Layoffs across the tech industry have been making headlines, as well. With top Canadian companies such as Wealthsimple, Shopify, and ClearCo announcing layoffs over the last few months. The market has certainly shifted – both in terms of VC opportunities and other employment opportunities.
New Net Jobs
Locally, we are seeing the effects of this market shift in our jobs data. While layoffs have occurred (Introhive recently announced a reduction across their global workforce), we did see an overall positive increase in net new jobs in the region. However there were only 179 net new jobs created in the startup ecosystem throughout Q2 2022. This time last year, there were 926 net new jobs created. This is a significant pullback relative to the growth of previous quarters. Overall the number of employed in this sector currently stands at 13,178.
Of the companies that we are tracking 22% hired employees, 57% had no change and 21% had less staff than at the beginning of the previous quarter. One thing that stood out this quarter, was the sheer amount of acquisitions. It is hard to gauge what the value of some of these acquisitions were, but the capital and talent from these exits will hopefully be recycled into new ventures.
Here are the big headlines out of the region in Q2 2022
When it comes to funding your startup, creating FOMO for your fundraise (fear of missing out) can be a powerful tool to attract investors. FOMO is the feeling that you’ll miss out on something great if you don’t act now. And when it comes to investing in a new company, investors never want to miss out on the next big thing.
As a founder, it’s essential to understand investor motivations when it comes to fundraising. And one of the most important rules is this — venture capitalists (VCs) need big returns. That’s because VCs are in the business of taking substantial risk to generate outsized returns for their investors. And the way they make money is by investing in companies that have the potential to become global successes.
This is where the power law comes into play. The power law states that a small number of startups will generate the majority of returns. Studies have shown that just 6% of startups will make up 60% of all venture capital returns. So, if VCs are looking for significant returns, they’re looking for that small number of startups that will generate most of those returns.
For this reason, it’s important to pitch a big vision when you’re raising money from VCs. They’re not interested in funding small companies that will only generate modest returns. They want to invest in companies that have the potential to become huge businesses. And the only way to convince them of that potential is to pitch a big vision of what your startup can become. That big vision will help in creating FOMO in your fundraise. After all, who wants to to miss out on that?
Finding the right investors
As a founder, one of the most important things you can do is to ensure that you spend your time wisely regarding your fundraising efforts. This means finding the right investors and building investor relationships that will not only provide the capital you need but also be able to offer valuable insights and connections.
There are a few key factors to keep in mind when searching for potential investors:
The fund’s size – Make sure the fund is large enough to support your round of funding. You don’t want to waste your time approaching investors who won’t be able to provide the amount of money you’re looking for.
The lead/no lead – It’s generally best to work with a lead investor, as they will be more likely to understand your business and can help drive the deal towards a close. However, if you’re struggling to find a lead investor, don’t be afraid to approach non-lead investors as well.
The fund’s theme – Does the fund focus on investments in your industry or sector? If not, it may be challenging to get them on board.
The lifecycle of the fund- Is the fund nearing the end of its life cycle? If so, they may be less likely to take on new investments. Each fund typically has a 3-5 year investment period.
Relevant portfolio companies – Does the fund have any direct competitors to your startup as part of its portfolio? If so, it could make it harder to get them on board.
Automating and personalizing your fundraising pipeline
Creating a great fundraising pipeline is essential for any business, but it can be time-consuming and difficult to do manually. Fortunately, there are ways to automate and personalize your pipeline to make the process easier.
One way to automate your fundraising pipeline is to use a tool like Zapier. Zapier can help you connect different software applications and create triggers that automatically add tasks to your pipeline. For example, you can create a trigger that adds new contacts from your email list into your fundraising pipeline.
Another way to personalize your fundraising pipeline is to tailor the properties and stages to your specific business. This will help you track progress and ensure you raise money at the right pace for your company. Additionally, consider using free investor databases like Crunchbase or NFX Signal to help you find potential investors.
You can easily automate and personalize your fundraising pipeline with a little effort. By doing so, you’ll save time and make sure that you are raising money efficiently.
Template for reaching out cold + email intro blurbs
What is the best way to reach out to potential investors and build up relationships? What are some good email intro blurbs that can be used?
When reaching out to potential investors, it is important to be concise and clear about what you are looking for. Investors typically see hundreds of opportunities a year, many of which generally just aren’t a fit. Intro blurbs should be short, sweet, and to the point. You should also include a call to action in your email so that the investor knows what you want from them (meeting, deck review, etc.).
Following up with potential investors is key to success. Sometimes, investors will not respond to your initial email. However, if you follow up promptly, you may be able to get their attention. Creating FOMO in your fundraise campaign will create a sense of urgency for potential investors to reply.
Visible has some great templates & tips for cold out-reach success.
How to leverage FOMO by creating momentum:
Your initial pitch to investors needs to show (at least at a high level) the roadmap to your startup becoming a massive success.
So how do you make sure you’re doing it right?
For starters, think in terms of acts, not slides. Just like a good play or movie is structured in acts, your investor update should be divided into three distinct sections.
In act 1, make your case; you’ll lay out what you’re building, what it can become, and why now is the time to invest.
In act 2, de-risk your approach; you’ll address any concerns investors might have about your ability to succeed by detailing what you’ve done to increase the odds of success.
And in Act 3, broaden your case. This is where you’ll make a case for why investing in your company is a good financial decision and a way to positively impact the world.
Remember, your goal is not to present a bunch of data or information in slide form. Your goal is to tell a story that will engage and excite your investors and leave them wanting more.
When it comes to setting meetings and beginning the process with investors, it is key to continue building momentum. Even when you start having active meetings with a handful of firms.
To do this effectively, you need to stack your meetings. That means reaching out to firms in sets of five and then refining your pitch based on feedback from the first eight or so meetings. Doing this will ensure that you’re always presenting your best case and create a sense of FOMO among investors who don’t want to miss out on the next big thing. If you stop actively pitching new investors – you might find yoursel with a empty pipeline if the ones your talking to now end up not investing.
So go out there and start crafting your story. And remember, when it comes to pitching investors, it’s all about creating momentum, generating FOMO, and building investor relationships. Do that, and you’ll be well on your way to success.