We can’t avoid hearing about the economic downturn. With SaaS multiples dropping from record highs, unicorn status — and funding in general — will be harder to come by in the next two years.
We are operating in a bear market, which means reduced valuations are the reality of fundraising — the private market follows the public market, and with falling tech stocks, down rounds are unavoidable.
But raising money at a reduced valuation, often called a “down round,” doesn’t mean you shouldn’t rally and organize communications. Down round news may not be a slam dunk that generates a tier one feature like a funding round that drove your valuation upward, but it’s still funding.
Taking the thought leadership approach allows you to control the message.
Our advice? Own it.
Here are some tips on the best way to go about announcing a down round, and why it’s still important information to make public.
You have nothing to hide
While operating in a bear market is more difficult, especially when trying to raise funds, the reality is that all tech companies are in the same boat. Lower valuations will happen, and during economically uncertain times, they’re beyond your control.
Rather than pretending a lower valuation didn’t happen, switch your mindset. You have nothing to hide, and in terms of PR, no news is not good news. So, focus on adjusting your expectations.
Announcing a down round won’t be the banner story you had initially hoped for, but in a market like this, there’s no shame in announcing fresh capital, regardless of whether your valuation has been reduced.
Funding information is publicly available through the SEC no matter what route you take, but by taking ownership of the communication, you have an opportunity to explain market forces and control the story in a more transparent way that will be beneficial to your reputation.
Fundraises serve as a marker in time
When media cover funding stories or other brand features, they look back at past rounds and additional company information for context.
In these moments, it’s essential to have as much information available as possible so journalists feel they can put together a story that captures the complete picture of your brand.
Any announcement, down round or otherwise, serves as a critical marker in time that media can reference in future stories.
Adjust your strategy
While we will typically recommend announcing a down round, that doesn’t necessarily mean publishing a press release over the wire or pitching the story to top media contacts as usual.
At a minimum, we recommend drafting a blog post from the founder or CEO outlining the facts of the raise. Ideally, this post should explain what the round means for the company and offer the founder or CEO’s perspective on the challenges of fundraising in today’s climate. Then, focus on pitching that perspective to select media who might be interested. Do not reach out to those who could take it the wrong way.
Taking the thought leadership approach allows you to control the message and prevents reporters from running with their own conclusions.
To summarize, don’t be afraid to own your fundraise. It’s the reality of the current market and likely will be for a while. Announcing such a round doesn’t necessitate shouting from the rooftops. Instead, down round PR can include thought leadership that serves as a marker in time and controls the message.