While the fundamentals of fundraising are a constant in most seasons and circumstances, certain market trends, economic conditions, and ecosystem shifts can play heavily into how fundraising rounds shake out.
To help founders keep a pulse on timely factors influencing the fundraising landscape, our Fundraising Today series shares a monthly pulse check from a seasoned investor to understand what founders should keep in mind — taking into account the baseline principles and the rules of the moment.
In this episode of Fundraising Today, Mercury’s head of community, Mallory Contois, chats with Rebecca Liu-Doyle, managing director at Insight Partners, whose primary focus is on B2B SaaS consumer marketplaces and fintech.
How would you describe the current fundraising environment?
For the most part, I would say the environment is still 1) relatively quiet and 2) pretty binary. Most companies are still extending their runway — they might be testing a little bit, but they are not aggressively coming to market.
That said, those who do go to market are falling into one of two camps:
- Startups whose business is going phenomenally well — no matter what the market context is, they are confident they’ll raise a great round.
- Startups that absolutely need to raise; they have no choice, and unfortunately, they are seeing structured deals coming into play — terms that haven’t existed for the past two years are making a return because these companies have no choice but to go to market.
Of the deals you’re looking at — the pitches coming across your desk that you’re talking to the rest of your fund about — what deals are generating the most momentum and confidence?
AI is the most transformative, disruptive thing we’ve seen in our industry in a long time. So, there’s a lot of buzz and excitement around that category.
Outside of AI, companies with good numbers and good performance that have clear business models and strong long-term valuations are generating the most momentum. If a startup is doing something completely new, we have no idea how the gross margins are going to evolve — making it difficult to underwrite in the current market. This doesn’t mean they aren’t good businesses, but it might be harder to get a good price because people don’t know how to value things in an uncertain environment. Capital is really expensive right now, so anything that would require a lot of cash to get to scale or profitability probably means a harder conversation.
On the AI front, are you seeing any hype cycle signals — or are people a bit hesitant to jump in on early AI?
There are a few companies we’ve looked at that we’re really excited about because we can see long-term differentiation with their AI-centered models. However, these are rare because there is a lot of uncertainty in how this will evolve.
I have one portfolio company that is a good example of the kind of bet we are willing to make in the AI category: Assembly AI. They want to be the API layer for integrating any sort of AI model. They aren’t just model building — they’re also asking “how do I productize this, what is the commercial value?”
What advice would you give a founder who is coming up on raising a seed or Series A round today?
- Have the numbers and know the numbers. When the business and the traction can back up the story, you’re going to have a more productive conversation.
- Be aware of the market context. Understand that adjustments, on both sides, may need to be made in order to get something done.
- Anticipate the kinds of questions you may be asked given the current market dynamics.
- Choose the partner and not the price. The highest price is not necessarily the best deal. You want people around the table who really care about you and the business, and who will actually do the hard work when things are not going well.
What advice would you give founders on outreach strategy, whether they’re reaching out to you personally or reaching out to funds?
First, know why you’re reaching out to me. What is it about Insight or my portfolio that appeals to you? Show that you’ve done your research and that you’re picking an individual rather than an idea or platform.
If you’re contacting me, the most reliable way for something to get read and responded to is email. LinkedIn messages disappear into the abyss and I don’t check other platforms with much regularity — but I’m always on email.
Mercury