The Summer Doldrums

We are entering the summer months when things move slower in the investor community. This is true of venture capital, but it is also true of other investment sectors as well. Summer vacations slow things down and investors also use the time to step back a bit and evaluate how the first half of the year has gone and plan for the second half.

I know many companies don’t like to raise capital in the summer months. While I understand that approach and it is conventional wisdom, I think the contrarian approach of raising in the summer can also work.

Raising money in the summer months will go slower and can be frustrating as you lose weeks at a time to vacations. Partner meetings are harder to get scheduled. And trying to get multiple potential investors on the same time frame is nearly impossible.

But the benefit of raising in the summer is that you are not competing with as many other companies to get the investor’s attention. You can more easily rise above the noise in the summer. Investors don’t take the summer off, they just slow things down a bit. So if you need to raise capital in the summer or just want to, you can make it work. You just need to allow more time for the process and be patient and flexible.

One advantage of raising in the summer is that you can take care of fueling the tank when things are slow with customers and be ready to step on the gas in the fall when things pick up again. The last four months of the year are often a sprint to the finish line and using up some of that energy raising is often suboptimal.

So if you find yourself in the market for capital this summer, don’t fret. But be prepared for a slog that doesn’t move as fast as you’d like it to. It’s the doldrums after all.

#entrepreneurship#VC & Technology

Comments (Archived):

  1. William Mougayar

    and multiply that slowness by 2 or 3 if you are in Europe 🙂

    1. awaldstein

      Is London in Europe?

      1. William Mougayar

        ha. who knows!but from a work/vacation perspective, the UK guarantees 28 days of paid vacation per year, pretty close to France’s 30 or 31 days.

        1. Girish Mehta

          Is London in the UK ? #justasking

          1. William Mougayar

            Is the UK U?

          2. Girish Mehta

            Is GB G ?

          3. William Mougayar


        2. awaldstein

          Good retort and info. Didn’t know that.

        3. LE

          Interesting just checked and wasn’t able to find whether that applies to small business as well. For a large business it’s just shifting of money really no different than paying teachers for a full year and giving them the summer off. In a small business having mandatory vacation simply isn’t practical in many cases. If you are a deli or restaurant with 1 deli man or cook it’s not like you can get someone to cover for him (or your delivery driver) and so on. (Well I guess anyone can drive so that’s an easy one to fix..) Works fine in any business with multiple employees in the same position (waiters let’s say). Most people who will comment in the media, think tanks or academics…well.. I imagine they have never felt the pain of a key employee not showing up for work and what happens with that. (See my other comment about execution elsewhere).

          1. William Mougayar

            not sure how they do it between sme and big co’s. but this seems to be the government’s stated rights for any worker:

          2. LE

            Seems to cover everyone although I don’t have time to read to see if it’s just pay or you have to take the time off. (If you can just pay them it’s not disruptive and you can factor that into your costs). Would be interesting to see how the climate in the UK changes and I wonder if this had been around pre-EU. In any case laws like this benefit large businesses because they have the resources and scale to work around the problem that not having someone show up creates (once again I don’t know if the “show up” is baked into this requirement w/o reading further).

          3. PhilipSugar

            You know the key to me believing you have a sustainable business is that you can have that key employee not show up. If you are totally at the mercy of one employee if they are smart they will make sure they extract as much as they can from you. If they run into bumps, divorce etc you will suffer greatly.

          4. LE

            True but then again where does that put a company like Apple with Jony Ives? Certainly there are cases where a primadonna is worth their weight in gold. (I know we differ on this as you’ve taken a similar position before.) And the local sushi restaurant that I used to visit lost a good chef. And even if you visit when he was there on the days he was off the food wasn’t as good. I don’t go there anymore, they lost me as a customer. There really isn’t an ample supply of good top end labor for small business to tap into. Maybe in NYC or a large city with the mass of people perhaps.

          5. PhilipSugar

            It’s ok to have a non sustainable business you just have to realize it. I would disagree about Apple.I would agree on your sushi restaurant.We have this music festival in DE called Firefly. 50,000 campers and 100,000 attendees. You can have a great business serving them.You just have to realize that if that goes away like the country version called “Big Barrel” or our crazy after Thanksgiving “Pumpkin Chunkin” (pumpkin launching contest where they actually launch a pumpkin for a mile in the air.)No issue. You just have to realize what your fixed costs are if that happens and make sure you “make hay while the sun shines”

      2. James Ferguson @kWIQly

        That’s like asking “is London?” – its existentialBut then Is Britain ? – not for long (if this summer madness lasts)If I still lived in London I would vote for recapitulation

      3. Twain Twain

        Happy 4th July w/e from SF to everyone!As for Brexit … Well … Joseph Campbell.

  2. Rob Underwood

    Raising money – it’s a beach!

    1. awaldstein

      Actually raising money is always a bitch. That i simply beach misspelled.

      1. Richard

        Life is a pitch

  3. pointsnfigures

    some of my best months trading were in the summer, though August usually wasn’t that great. less people around means less competition. you also have more time to talk to people when you are working.

  4. Girish Mehta

    Off-topic. Saw the news on Michael Cimino today and reminded of The Deer Hunter.Listening to Cavatina (Stanley Myers) again, one of my favorites. Melancholic and Utterly Beautiful.

    1. Salt Shaker

      Many parallels w/ start-ups and the film industry. With each it’s always a challenge raising capital, while a Director’s reputation and track record, like that of a Founder, goes a long way. Films can have a long wait til the pay window, too. That said, there are no guarantees. For every “Deer Hunter” there’s a “Heaven’s Gate.” Cimino was a talent, though. RIP.

      1. awaldstein

        Yup but I think the odds of are even worse with films and the financing so challenging and convoluted.Nothing riskier than making a movie in my opinion.

        1. Salt Shaker

          Hmm, perhaps the restaurant biz?Heading to Walla Walla wine country today.Have you been?

          1. awaldstein

            Nope but do share.Really into Portland lately as there is so so much innovation going on there in the urban wineries.Honestly been missing my connection to the wine community since I sold the pieces of my project off a few years ago.Been thinking of something very retro and resource light except for my time like a newsletter/blog thing to aggregate my community which is so broad.

          2. LE

            To me the restaurant biz is more about execution. [1] After all it’s no secret that people like, say, Italian food or Sushi. You could also say that the movie biz is about execution but certainly to a lesser extent. There are probably more cases of people who know the movie business and have had success having a flop then there is of someone who knows the restaurant business failing.[1] I am reminded about an episode of Marcus Lemonis’s the profit where he got all excited when investing in (I think it was) a sign business. All he talked about was getting sales for the business. If you’ve ever been in a similar business (I have) getting work is actually easy. What’s hard is not fucking up the work that you get. Which depends on the quality of the labor that is available. Everything is custom obviously even more so than in a restaurant. In a restaurant of course you have small sales and customers (generally) so if you mess up an order or two it has little impact. In a sall custom manufacturing business if you mess up an order or two of a big customer you loose the customer (which is one of the ironic reasons it easy to get business, the other guys have the same problem and screw up work).

      2. Girish Mehta

        Remembered for the wrong reasons for Heaven’s Gate, but made one exceptional (arguably great) movie with The Deer Hunter.Even more poignant when you consider the backstory of John Cazale-Meryl Streep during the making of the movie.

        1. Salt Shaker

          I recently read about the relationship bet Cazale and Streep. Didn’t know about it. She’s simply incredible, arguably none better in the modern film era, but Cazale’s no slouch. His performance in “Dog Day Afternoon,” a personal fav of mine, is a classic.

          1. Girish Mehta

            John Cazale acted in only 5 movies. And All 5 movies were nominated for Best Picture at the Oscars.The Conversation was another outstanding film, and it lost out for Best Picture in 1974 to The Godfather Part II. Cazale was in both films.

        2. LE

          Two scenes that I remember the most from that movie are Cazale’s character forgetting the boots and needing to borrow them from DeNiro’s character and the russian roulette scene. Also the use of ‘fucking a.

          1. creative group

            LE:Cazale’s character Fredo Carleone was easy to dislike. A weasle. Anytime anyone displays any similar character traits we will not do business with them. Just like handshaking a wet greasy hand. (We don’t handshake anyway, credit certain cultures refusing to wash their hands after the restroom, wealthy to poor) TMI

  5. Semil Shah

    The last line of the 1st paragraph is the key: “investors also use the time to step back a bit and evaluate how the first half of the year has gone and plan for the second half.” If I don’t fight to have time to myself to reflect and think and plan, it’s hard to evaluate where things went wrong in a process, etc. I think of the summer as it’s own smaller “wave,” one that I need to ride to prepare for the bigger waves for the rest of the year.

  6. LE

    Investors don’t take the summer off, they just slow things down a bit.Would imagine that with some investors you could meet them where they summer. It’s not like sitting on a beach all day is particularly exciting. Maybe on a cloudy or rainy day. [1][1] Or creatively offer to shuttle them back and forth, and hold the meeting during transport. (Better than watching Harry Potter, what a fucking moron that guy was).

    1. PhilipSugar

      That is a good idea, although it does reinforce the idea of who has the power. Although if you take vacation as well and agree to meet on bad days then that probably works.

      1. LE

        The power thing is important I agree. However I often use that (in other situations, I’m not fund raising) to my advantage. You can create among other things a delta in behavior. Be totally subservient and needy to start giving the other party the power. Then back off to the point where they get the idea (in a subtle way) that you have other things going on. Subliminally, if done right, they get the message and then are more interested. The behavior delta is the key to that. Takes practice.I would think that investors like hustlers. Guy who is willing to work on a holiday (especially a sunny day) should score extra points. You don’t want to (I would imagine) give someone money who is whining that they need to be taking time off when they are in their 20’s.

        1. PhilipSugar

          The “takeaway” is such an important concept. It is why they should teach sales at Wharton. Instead you have to take an elective course at the School of Education.

          1. sigmaalgebra

            B-schools have physics envy, want nothing less important than Einstein’s E = mc^2.

  7. Pranay Srinivasan

    There is also the risk of investors not wanting to spend time diligencing a particularly nuanced deal that requires some time. No matter how patient we are as founders, there could also be a tendency from investors between late June and mid August to just say “No” because its even *slightly* outside their wheelhouse in terms of diligence.Thanks,Pranay

  8. PhilipSugar

    I think the summer is a great time to pick a project you’ve been meaning to do and just get it done.

  9. LE

    I wonder how investors located in areas with nice climates year round are different than investors that are not.Seems that that would have an impact. If you know you have good weather 200 days per year that’s a bit different than just having it (summer weather wise), say, only 45 days per year. [1][1] Roughly 1/2 of 90 days of summer, if that, you get actual good weather in the summer.

  10. creative group

    News break: (Faux News):As reported first by Maria Bartolomeo of Fox Business (sic) creative group has reached tentative agreements, which anonymous sources who are not authorized to speak on behalf of each VC (agents, rumor mongers, etc) stressed talks are still ongoing, with Jim Goetz, Steve Anderson, Chris Sacca, Mary Meeker and AVC’s own Fred Wilson to create a VC dream team. The contracts are rumored to be finalized on July 7 when the VC moratorium on signings and trades are lifted. The VC’s respective companies are expected to match the offer sheets offered to the VC’s dream team that will lend their expertise similar to soccer teams lending players.(Lazy reporters and editors of newswires read disclosure this is not a real news report, this is a play on the hapless New York Knick President Phil Jackson assembling once good players who can’t stay on the court. Jeanie Buss please take Phil Jackson who is ruining our team back to LA LA land and while you are at it take the owner Dolan with his silverspoon)

  11. sigmaalgebra

    Okay, I have some data to test Fred’s hypothesis. We can do a statistical hypothesis test.So, I took my development computer file system directory of venture capital interests, got a file of all the tree names in all the subdirectories, kept just the lines for e-mail messages, from the time/date stamps for those lines kept just the months, sorted the months into ascending order, ran an editor macro to count, for each month, how many instances there were of that month, and got, right, 12 counts. Then ran a macro to convert those counts to a horizontal bar chart:Month Count Plot—– —– —- 1 184 XXXXXXXXXXXXXXXXXXXXXXX 2 160 XXXXXXXXXXXXXXXXXXXX 3 198 XXXXXXXXXXXXXXXXXXXXXXXX 4 140 XXXXXXXXXXXXXXXXX 5 109 XXXXXXXXXXXXX 6 103 XXXXXXXXXXXX 7 144 XXXXXXXXXXXXXXXXXX 8 178 XXXXXXXXXXXXXXXXXXXXXX 9 239 XXXXXXXXXXXXXXXXXXXXXXXXXXXXX10 279 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX11 149 XXXXXXXXXXXXXXXXXX12 169 XXXXXXXXXXXXXXXXXXXXXSo, month 1 is, right, January. So, the summer months are June, July, August, that is, months 6, 7, 8.Yup, just by eyeball from this data, it looks like Fred’s hypothesis is confirmed!How to do a statistical test? Ah, that would be for the second grade!Ah, heck, since we are this far, let’s try the second grade!103 + 144 + 178 = 425So, the total of counts for the three summer months was 425. Now, assuming that Fred’s hypothesis is wrong and that months are irrelevant, then what is the conditional probability given this data of the total counts for three months being as low as103 + 144 + 178 = 425Right, we are doing ‘resampling’. So call Bradley Efron (at one time at Yale) or Persi Diaconis (at one time at Harvard), apparently now both at Stanford. Or just charge ahead!So, suppose Fred is wrong and that month doesn’t matter. So, we have an hypothesis, month doesn’t matter. Since we are saying that month has no effect, we are saying that the effect of month is null. So, we call our hypothesis our null hypothesis.Why do we want our hypothesis of null or doesn’t matter? Because it lets us have an assumption, the doesn’t matter, that lets us do some calculations.Or, in more mathematical language, by the intuitive description month doesn’t matter, we are assuming that the 12 counts are independent samples from some one probability distribution. That assumption lets us do some probability calculations and, thus, test the null hypothesis.=== Begin — Statistical Hypothesis Testing ===We assume this null hypothesis in order to test it. In this case, we suspect we will reject it. Then we will continue to entertain Fred’s claim of “doldrums”, that is, we will at least tentatively accept it. If we do reject the null hypothesis, then we will have added some evidence that Fred’s claim is correct.Why be so indirect, that is, why set up the null hypothesis with the intention of rejecting it; why not be more direct for Fred’s claim of “doldrums”? Because the null hypothesis is much easier to work with, much more definite, than what there can be in cases when we can reject it, that is, much more definite than all the possible alternatives.Or Fred is claiming that there is a summer effect. So, we assume that there is not, reject that, and conclude that there at least something in terms of an effect and, thus, add evidence that Fred is correct.So, here we have an introduction to statistical hypothesis testing.Does this procedure have the faint aroma of three day old fish? Maybe, but often it is better than nothing. An early example was some quite solid evidence that a certain roulette wheel was not fair! That is, was crooked!More generally, for big data, analytics, artificial intelligence, machine learning, smarter machines, etc., hypothesis testing has a lot of power and value that is being neglected.=== End — Statistical Hypothesis Testing ===Okay, summer has three months, June, July, and August, and as we have seen the total counts of those three months is103 + 144 + 178 = 425Now, we can find the total counts for all combinations of three months and compare, that is, see what the probability is of getting a count as low or lower than our103 + 144 + 178 = 425So, how many combinations are there? Well, for picking three months, there are 12 ways to pick the first one, 11 ways for the second, and 10 ways for the third. But we have over-counted because we have selected the three in all the different orders, that is, 3 ways for the first month, 2 ways for the second, and 1 way for the third.So, the total number we want is12 * 11 * 10 / ( 3 * 2 * 1) = 220that is we have12! / ( ( 12 – 3 )! 3! ) = 220which is a special case of the number of combinations of n = 12 things taken m = 3 at a timen! / ( ( n – m )! m ! ) = 220So, we will find the 220 sums of three counts and compare with our observed for summer103 + 144 + 178 = 425It turns out, the fraction of counts less than or equal to 425 really is the probability of rejecting the null hypothesis when it is true — that is alpha or the significance level of our statistical hypothesis test.Just why that is true in this case is a bit involved — I’ve published a paper with a proof that covers this situation as a relatively simple, special case. The argument is involved because the 220 sums of three numbers, all drawing from just the same 12 numbers, are not probabilistically independent.But finding all the 220 sums and comparing with our observed103 + 144 + 178 = 425we find that 27 of the sums are less than or equal to our observed 425.So (with the proof), we have that the probability (conditional probability conditioned on the observed 12 numbers) of rejecting the null hypothesis when it is true is27 / 220 = 0.122,727,272or12.273%So, either months do not matter and we have observed something that happens only12.273%of the time; or months do matter; the null hypothesis is false; there is some summer effect; we continue to entertain Fred’s claim; we add evidence to Fred’s claim; and at least tentatively we accept Fred’s conclusion as correct.So, why do I have the data for the 12 months? During a time interval in the past, I was communicating with venture firms about various possible projects. Eventually I concluded that the situation was much like communicating with girls my age in high school — they weren’t interested! It was one-sided communications! I was wasting time.So, I concluded that the VCs were something like the girls — they would talk to me if I was making money enough, or at least making some money with the amount growing quickly, and little or nothing else mattered.So, I needed a project — a good project, one that could make me wealthy — that I could get to nice profitability with just my own checkbook and grow from there with funds just from revenue and cooked up such a project, my current startup.I will either get to that profitability and not be willing to accept equity funding, or I won’t get to that profitability, won’t get equity funding, and will have to try another project. Either way, there won’t be any equity funding for my current startup.More generally, venture firms and I have essentially nothing in common in our thinking. I made a good effort, but “nothing in common” has to be the rock solid conclusion.

  12. creative group

    Where is Twain Twain when you need her? She would have no time for grade school folly. Would realize no real money on this blog is in play to even commute. So the Sunday is enjoyed doing what pleasures you most. (Whatever pleasures you most on your Sunday) Gheez!———–Our Sunday minute:Knicks committing money to a bench player and other a former MVP since injury plagued. Both at 60% capacity at best of their former high level performances. (Joakim Noah and D Rose)Samuel L. Jackson character in Unbreakable.

  13. george

    I like the phrase, “money never sleeps.” It’s not summer in some other parts of the world and as you suggest, it’s a period of opportunity; unless of course you’re in the UK – sorry, but I can’t believe how that blew up!

  14. panterosa,

    I do my best work in summer, when I’m supposedly on vacation. my brain is much airier and whimsical. more free time means more idea flow. But then I work in creative. I do agree though that the more reflective state makes assessing the year and thinking more philosophical, which I find more interesting.