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Raising capital has always been a delicate situation for innovative entrepreneurs, but having the sand of a global pandemic thrown into the gears really brought things to a halt. The flow of money immediately froze up, and startup leaders — particularly aspiring businesswomen of color — felt (and still feel) the chill deeply.

Related: Out of $85 Billion in VC Funding Last Year, Only 2.2 Percent Went to Female Founders. And Every Year, Women of Color Get Less Than 1 Percent of Total Funding

Granted, funding can be a blessing and a curse. I’ve done deals and then desperately wished I could give the money back. The investor wanted to make a quick buck and constantly pushed us to make decisions that were bad for the in the long term. Pandemic or not, it’s vital that startups avoid taking the wrong money or partnering with the wrong people as it can cause far more harm than good.

Despite best intentions

Certain challenges tend to arise repeatedly when entrepreneurs and startup leaders begin raising capital. Common snags include timing, relationship quality and vigilance.

Timing is likely the biggest challenge for raising capital in a startup. Many external macroeconomic factors dictate access to capital. During a recession (or aversion to certain industries), investments can be hard to come by, even for the best teams with rock-solid pitches. Many startups with excellent ideas likely lost their chance in 2020 due to the global health crisis. Many investors, VCs and angels wanted to pause their investments for several months until things calmed down; if startups could not weather this period, they often failed. Having enough runway in your budget to survive downturns can make or break most startups. Many startups have failed that would have survived if they could have just lasted six months longer.

Another challenge is having sufficient quality and breadth of relationships to find the right investment partner who shares the long-term vision for your business. Ideally, they should be interested in how they fit into your , Series C and so forth at the time they invest into your seed or Series A rounds — and not just looking to be involved in only one stage of the company’s growth. To find this type of investor, a founder needs to maintain relationships with a group of potential investors that is both broad in reach and targeted in alignment with the business. Too many seek VC too early; those should be reserved for growth-stage startups. For early stage startups, you need to cultivate relationships with angel investors, or even friends and family.

Related: Swiping Right on a New Investor? Do This First

Ultimately, startups will spend more time fundraising than not. It is acutely frustrating for a startup founder to constantly fight to strike a balance between operating the business and fundraising, as the balancing act lasts for quite some time. However, being prepared at all times to give a or investment deck for funding your business is essential and can define your success. It should always be available to present to an investor and should continuously be updated rather than dusted off every couple of years.

Proper preparation prevails

When working to overcome the aforementioned challenges, it’s important to remember that investors are simply human. They can be wrong and make mistakes, just like everyone else. The best investors, naturally, are those who understand your industry and have plenty of experience within it. Entrepreneurs and intrepid startup leaders looking for funding should take these proactive steps. 

1. Always be ready to do a deal

Even if you have cash remaining for another year or longer, you never know when things could change or when a once-in-a-lifetime partnership might present itself. One time, an investor approached me who was interested in placing a large investment in my business, InList, but I was unprepared. I had not thought I would be fundraising for another few months. It took me weeks to get a proposal together for him. In hindsight, I should have had my business plan, pitch deck and term sheet updated and ready to send at a moment’s notice.

2. Pitch the right investors

Align potential investors for the stage your business is in and ensure they are as experienced in your industry as possible. If you are early stage, don’t waste your time with VCs. When I first started looking for capital for InList, I pitched too many VCs and angel investors who had no experience in hospitality, entertainment or travel. Rejection is common in seeking investment, but their refusal was for the wrong reasons. They could not wrap their heads around the business model because they had no experience in the space. This was discouraging at first, until I received completely different feedback and interest from potential investors with experience in the industries.

Related: You Can’t Get VC Funding for Your Startup. Now, What?

3. Always be networking

Even during a lockdown, there are ways to cultivate your network online and through introductions from friends. Never stop growing your network, and focus on not only the quality of your network but also its breadth. Even if you know many high-powered businesspeople and investors, you limit yourself if those connections are all within one geographic region (your city, for example) or one niche. Investors operate in small social circles. If one investor in that circle rejects an investment, often the rest follow suit without bothering to investigate the merits of the investment. You can avoid this by pitching investors who have no or little overlap in their circles.

4. Have an emergency runway fund

If you have already raised capital, create a skeleton operating budget that allows you to remain operational with minimal expenses. It’s also smart to have a reserve budget allocated for this contingency. This way, should the market turn unexpectedly, as it did in 2020, you increase your runway and chances of surviving long enough for the right deal to come through.

Regardless of whether you’re actively seeking investment, always keep your business plan and pitch deck updated. Constantly cultivate and develop new and current relationships in the industries where you may find a suitable investor. Also, understand whether the timing is right for your business to seek investment. If not, see if you can wait until the appetite for investment is stronger or if you need to pivot your business.



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