Raising Money During The Summer Slowdown

The streets are empty in NYC this July 4th weekend and it seems like everyone is at the beach. The Gotham Gal and I are getting ready to head to Italy for a week on Sunday night. Summer is here and I can feel the pace of work life and city life slow down.

Many of our companies experience a slow third quarter because people aren't working at quite the same pace in July and August and it is hard to get it all back in September. And many entrepreneurs and investors I work with assume for the same reasons that the summer months are a bad time to be raising money.

I don't think the summer months are a bad time to be raising money. It's a different time to be sure, but not necessarily worse. We see a lot less incoming activity in the summer months so it may be the best time to get a VC's attention. If everyone else thinks it is a bad time, then the contrarian in me says it is a good time.

I just did a quick query on our portfolio and we made our first investments in eight of our twenty-seven active portfolio companies during the third quarter. Three of our investments were closed in July. Three of our investments were closed in August. And two of our investments were closed in the first couple weeks of September.

Eight out of twenty-seven is thirty percent of our portfolio, and that is north of the twenty-five percent of the year that the summer represents. So our firm has been more active on new investments during the summer than we are on average.

I suspect that if you look at the VC industry as a whole, and there are plenty of services you can use to do that, you will find that there really isn't a summer slowdown in investing activity.

But as I said a bit earlier in this post, the summer is different. And if you plan to be raising money this summer, you need to plan for some things. First and foremost, people will be on vacation, as I will be next week. So you it will not be as easy to get meetings in the summer. You will need to plan ahead a bit more. And when you do get meetings, there will not be as many partners in attendance. So you may need to visit the most engaged venture firms in your process a bit more than you would other times of the year. It may take longer to get a full partner meeting scheduled and when you show up, some of the partners may be on the phone from vacation spots around the world. It may be harder to get them engaged.

Due diligence is also a bit harder to do in the summer months. The people the VCs need to talk to to understand the investment and the people are more likely to be away. So anything you can do to help schedule those calls and meetings will be much appreciated by the VCs.

The bottom line is it takes a bit more work on your part to run a fundraising process in the summer months. But the benefit is you may well find that you are seeing a more relaxed set of investors, who are spending a bit more time on the golf course, and have clearer heads. If you extend your timeline by a month or so, dedicate a bit more effort to scheduling and quarterbacking the process, you will find a receptive audience with their checkbooks open.

The thing to remember about VCs, and all sorts of professional investors, is that we get paid to invest capital. It is what we do. So just because it's a slower time of the year, doesn't mean we aren't still doing our job.

If your company will be running out of money at or before year end, you should be raising money now. Do not let anyone convince you to wait until "everyone is back from the beach in September." That is too late. Do it now.

#VC & Technology

Comments (Archived):

  1. LivePaola

    Hi. Where in Italy are you visiting? Any advice, just ask your loyal Italian readers.

    1. fredwilson

      rome for a few days, then visiting friends in tuscanywe don’t plan to do or see muchjust chill and see old friends

      1. William Mougayar

        In Rome, I highly recommend coffee at Tazza d’Oro or http://www.santeustachioilc… – you bring some coffee from Sant Eustachio’s.

        1. Julien

          Indeed, best espressi 🙂 and for Icecream, I’d go for San Crispino or Gelateria del teatro (take puro if you’re into chocolate), both in the centro storico!

      2. LivePaola

        Sounds neat. Enjoy!

      3. David Semeria

        You won’t be doing much chilling, Fred.The temperature and humidity have gone through the roof here recently.We’ll be edging 40°C next week.

        1. fredwilson

          so we will “chill” in the heat and humidity!

          1. David Semeria

            Aye. Easier in Tuscany than Rome, though. You’ll see what I mean….

        2. ShanaC

          You must be feeling it- though what does this mean for italian wine…

      4. awaldstein

        Enjoy Fred…I spent two weeks in the countryside outside of Sienna, in Castelnuovo Berardenga, last summer…remarkable time.Sangiovese comes in many forms….Chianti, Rosso and the remarkable, Brunello. Enjoy them all.

  2. William Mougayar

    From your mouth to God’s ears.

  3. Julien

    Italy? Let me know when you’re in Rome, I know a pretty good guide here, and I’d be happy to share a few fresh drinks with you!

    1. Mark Essel

      Hey cool Julien, I didn’t realize you were in Rome. Michelle (my wife) and I plan to visit there next year. I’ll certainly try and look you up.

      1. Julien

        Not sure we’ll still be there next year 🙂 But I could certainly give a few tips anyway!

        1. Mark Essel

          Good point, Superfeedr is moving fast. Before you know it you’ll be in NY or SF :)?

          1. Julien

            Hum, actually, I’m more than half of the time in SF 🙂 It’s just that it’s not easy for everybody to get US visas 🙁

  4. davidmit

    Enjoy the summer ! If you had made one less investment in the summer, the percentage would be 25.9%, so I guess it’s not statistically significant :)But I like the contrarian thinking!

    1. davidmit

      oh and it also shows that you don’t invest significantly *less* in the summer, which is the main point!

      1. fredwilson

        yes, that is what i was trying to show

  5. aweissman

    Fun analysis – I just ran some of our numbers – 40+ investments (including follow on investments where we were not lead investor) in 3 years:*28% Q1*28% Q2*22% Q3*22% Q4Of the Q3 investments, however, 70% of those were in September, suggesting the July/August slowdown may have pushed those over into post-summer territory

    1. fredwilson

      thanks for sharing those numbers andya bit different conclusionbut even so, i bet if we got ten firms to submit numbers, we’d get pretty close to 25% each quarter

    2. davidmit

      Out of curiosity, I took 5 minutes to do this using the NVCA 1995-2009 numbers’ for Software, the industry I’m most interested in (as opposed to biotech, which may be less relevant for the readers of this blog and may require longer due diligence).Q3 is on average slower, but not by much:QuarterQ1Q2Q3Q4# of Deals24.01%26.44%23.69%25.87%Investment Dollars24.45%26.98%23.03%25.54%If you compare the busiest Q2 and slowest Q3 quarters, it’s only a 10.4% reduction in # of deals.(the numbers don’t change much when adjusting for different activity levels during the bubble, or looking just at “first money in” vs. followons).Fred and other VCs, do you see a reduction in emails / intros to companies of the same order of magnitude?At any rate, this probably shows that entrepreneurs should not pay as much attention to this as they are told to!

      1. fredwilson

        this is pretty much what i thought we’d seethe differences quarter to quarter are almost negligible

        1. Anthony Ortenzi

          I’d be interested in seeing analyses showing the returns on investment by quarter in which the investment is made. Are the people compelling enough to get you out of “summer mode” those who end up overachieving — precisely because they refuse to slow down?

          1. davidmit

            Given the magnitude of the differences, I wouldn’t expect a big difference in returns.Another hypothetical explanation for higher returns for summer investments would be less competition among VCs and resulting lower valuations… but I’m not even convinced that’s true.Can’t get the answer from the macro data of the NVCA. Those studies of returns are tricky b.c. of factors like survivorship bias, etc.

  6. Daryk Pengelly

    Fred, can you please provide examples of “services that allow you to look at the VC industry as a whole…”?

    1. fredwilson

      crunchbase is freeventuresource is paidthere are others but those are a good place to start

  7. Satish Mummareddy

    Is raising funds from USV different than other firms because USV has only 3 partners and is a very partner oriented firm?

    1. fredwilson

      every firm is differentwe are pretty informal and unstructured in our process

  8. Peter Fleckenstein

    Great post Fred. I’m always fascinated by people who say wait. It screams the question “Why?”. The answers usually reveal that waiting is an excuse.As for your trip to Italy enjoy it. I love Italy from Torino all the way down to Sicily. Have fun in Rome and remember:Quando a Roma , comportati come i romani.

    1. fredwilson

      i will happily follow those instructions peter

  9. RWK: disruptive tech/guerrilla

    Fred,1) Appreciate Your Sharing Your Insights. Valuable.2) Personally, I don’t build VC into my game plan. I prefer when they seek ME out. Can you share cases where you’ve approached a group and tried to actively throw funding at the hesitant startuppers?- Bob

    1. fredwilson

      Etsy and Twitter would be two examples. There is one recent example but we’ve never announced that investment

      1. RichardF

        I’m wondering if that’s one you accidentally let slip recently 😉

        1. fredwilson

          which one did i accidentally let slip?

          1. RichardF

            I thought it might have been Fwix until I realised you had invested in outside.in

          2. fredwilson

            that was about M&A, not an investmentand that was a mistake, a “DM fail”

  10. Mark Essel

    When your company is small, fundraising is a full time job. Pitching investors, and perfecting your introduction. I’ve decided I’d rather build a product with the resources I’ve got and pitch when it feels right. As long as I have forward momentum even if it’s inches, I can judge if I’m moving the right direction.I’ve seen some founders pull together a pile of money in a fraction of the time, but I’m pretty sure they’re leveraging angel and seed dollars to discover their business model. More power to ’em.

  11. Guest

    Do you think the fact that the actual investment was finalized in Q3 is representative of when the majority of meetings/pitches took place? Or was it likely most of the meetings happened in Q2, and Q3 was really just the paperwork to get the deal done?

    1. fredwilson

      that’s a good questionif i look back at the deals, most were summer processes but not all of thembut it is also true that a few of our october deals were summer processes

  12. shafqat

    Just to add some real data from an entrepreneur’s perspective: I am wrapping a weeklong fundraising trip to SF today. I was able to meet or take calls with 25+ investors. So Fred is right – the notion that everyone is away or VCs shut up shop is just a myth (one that I also feared prior to my trip). I did not have a problem reaching a single investor/firm, and if there were ever vacations in the schedule, often another partner would step up to speed things up. Contrary to popular belief, it seems like investors actually do care about entrepreneurs 😉

  13. ShanaC

    I need to think through this advice- lets pretend for a second that it isn’t just a VC thing- that lots of businesses slow down in the summer. Hmm, how do you get in touch with those in the know about jobs. I guess this way.

  14. Gorilla44

    Excellent post. I’d like to add just two points:- From my experience, raising capital from angels during the summer is harder than from VCs. Angels are typically (at least most of the ones that I deal with) retired executives. In the summer, many spend weeks/months at their summer homes or on long vacations.- Also, raising capital takes months. You have to court the VCs over a long period of time if you don’t know them from previous dealings. The summer hasn’t affected the courtship process for me but has affected “final” decisions and closings.

    1. fredwilson

      great point about angelsi am sure that is true

  15. reece

    Funny to see your post today, and then see Chris Dixon tweet this:”.@fcollective is looking fwd to seeding great startups this summer while big VCs are on vacation spending their management fees”…after which i saw some choice feedback from another VC.

    1. fredwilson

      i saw chris’ tweet tooi was happy that i had posted about this earlier

  16. Michael Aronon

    Second the thought about fundraising, Im an “older” investor (with a fund) that spends lots of time at my beach house, I actually have time to review pitch decks and have done some quality “skyping in” to meetings that my associates have had. When Ive been raising money from LPs, summer mtgs have often been much better as they are less rushed.On Italy, second the recommendation of San Crispino Gelato in Roma (check out the new one near Pantheon which has much longer hours). In Tuscany, I have an AWESOME bike guide who does private and group rides. One of my favorites places anywhere is the Enoteca (Wine Library) in Greve where we started and finished our ride.http://www.travelpod.com/tr…The Prada factory store is quite the place.

    1. fredwilson

      I might want to do some biking in tuscanyI’ll need a bike and a helmet thoughWhat is your guide’s contact info?

      1. Michael Aronson

        http://www.ibiketuscany.comMarco is awesome, we did the Chianti 1 ride. They had pretty darn good hybrids since some of the climbs were gravel over the top of the “hills” Basically we did an up and over and around from Greve.My wife went along not knowing it a was an advanced ride, she was fine on the uphills but not on some of the rather steep downhills.Strong recommend getting on one of their rides if available. It was one of my travel highlights.Dont hesitate to do a private (or semi) ride, cost was very reasonable.

        1. fredwilson

          how long in advance do you need to book the rides?

  17. Ollie Queen

    Funnily enough I always find I’m always become business proactive during the summer, the nice weather and general optimism in the air gives me a real drive. So maybe this summer’s muse will find itself in front of some investors and I’ll see what happens from there!Have a great time in Italy!

  18. Fred T

    Thanks Fred. Will keep pivoting with this outlook during the summer. Safe travels.

  19. Benjamin Stein

    Fred,How do you like Bayonne? I used to caddy there but I only played the course a few times. After spending hours looking for guests balls in the high grass, Bayonne was the last place I wanted to be on my day off. Number 16 is a great hole isn’t it?I still caddy at The Country Club outside of Boston. I would love to be on your bag if you ever get to play there.

    1. fredwilson

      i play “jordy rules” when i play there. you look for your ball in the fescuefor 30 seconds max. if you can’t find it, it’s a lateral hazard, one strokeand a drop in the short rough.it makes playing their so much more enjoyablei love the views but i only play it about three to five times a yeari don’t play that much golf between work and family, it’s not a priority

  20. Jeremy Campbell

    I was talking to my accountant today about when to raise money throughout the year. He agreed with me that there is likely less competition for investor’s attention/capital during the summer. This informative article couldn’t have come at a better time, thanks for writing it Fred.