The Mercury Playbook Part 2: Reduce your company spend and raise capital — without layoffs

Mercury is the fintech company that offers banking* for the next generation of startups, trusted by companies like LMNT, Lendtable, Phantom, Sprig and more. They’re also funded by some of the sharpest VCs in the Valley, from a16z to 500 Global to CRV. 

For the second piece of our two-part series, we sat down with Immad Akhund, Co-founder and CEO of Mercury, to learn how to navigate funding in today’s market conditions. We dive into: 

1. Tactical ways for reducing your company spend – without layoffs
2. How to raise venture capital in an ongoing market downturn
3. Optimizing your raise timing and cold outreach playbook

“Product interest waxes and wanes, which is out of your control. What is in your control is working hard, learning from the process, and just not giving up.” 

Tips For Reducing Your Company Spend — Without Layoffs

Apart from payroll, which is normally the most significant cost center for any company, Immad suggests other areas where businesses can responsibly cut corners and save money. 

1. Tooling — Nowadays with SaaS, there’s a tool for everything. It might make you feel like a kid in a candy store, but applying tech to every area means those costs add up. 
2. AWS — Try optimizing to cut down on the number of servers you’re using. 
3. Ads — There are a lot of resources out there to help with ad optimization, but a simple issue is honestly interrogating whether you’re targeting users in a way that converts well. 
4. Office space — Small companies can usually work out of someone’s house. Is your office or coworking space crucial to the success of the operation? 

At a high level: Be more ruthless about which growth motions are and aren’t driving real revenue. 

“It’s an unpopular topic, but a big way to save is honestly decreasing employee salaries. Doing so is very difficult but not uncommon.” 

How to Raise Venture Capital in a Market Downturn

For early-stage founders, Immad advises scoring your first round of funding in four steps: 

1. The materials — You need your deck and data all worked out and ready. At minimum, that includes debt, projections, and existing stats, revenue, and financials. 
2. The rehearsal — Practice as much as possible, ideally with other founders. Troubleshoot and figure out what sounds good, what’s missing, and what’s just falling flat. 
3. The research — Make a spreadsheet of every investor you meet and speak to. Figure out which ones are right at the intersection of your company. 
4. The actual meeting — Get yourself in front of investors. The best way to do so is classic: Turn to the network you’ve built up and maneuver some warm intros. 

That final step is crucial to founder success. The best case scenario? Once you’ve been able to get in front of one investor, they’ll ask who your ideal five investors are. If they’re connected and believe in what you’ve just shown them, they’ll make the intro. 

But, if you want to get to that point, you’ll have to do the work beforehand. 

Join entrepreneurial communities and don’t shy away from actual conversations at networking events. Even a slightly warm intro can work, on average, ten times better than a cold call. 

If You Do Have to Do Cold Outreach — Here’s How

If you do need an even larger pipeline, you can find angels or VCs with aligned investment theses via email, LinkedIn, and even Twitter. 

A rule of thumb: Always cast a wide (but thoughtful) net for successful cold outreach. If you want to speak to ten people, you’ll first need to try making contact with at least 100. 

Send clear, concise emails with something notable or memorable that’ll make your product or yourself as a founder stand out. The bar is higher when a person has zero context for who you are — and that’s exacerbated when it’s not in person. 

For cold leads to work, you need to tangibly demonstrate that you’ve been in the game for a while and aren’t messing around when you say your company will multiply their funds. 

Tweaking Your Fundraising for Current Markets

In 2021, countless projects were met with success in fundraising. This year, things are notably more difficult. So, founders should ask themselves — and be cutthroat in their answer — whether their idea is actually fundable in the first place. 

At a baseline, not everything is fundable, simply because not all goods have a large or viable enough market to interest VCs. As Immad puts it: 

VCs’ interest in your product will ebb and flow. The only thing that’ll hold it is the market. 

With present market conditions, every fundraising step will be harder and take longer. Get accustomed to it and gear up by growing your networks even wider, talking to more people, and being ready to receive lower valuations. 

The Value of Your Lead Investor

Along these lines, there were far fewer anxieties around the investment process in 2021. 

Angel investors wouldn’t need to think too hard about putting down $100,000 because they were confident someone else would come along to provide the brand with their next $100,000. 

Now, everyone’s concerned their $100,000 will be the only money down, and the brand will fail. 

So, many investors want to see that you’ve piqued interest from other people as well. Or they could be swayed by a lead investor who’s willing to cover most of the first round. 

“Having all of your data in line and all of your ducks in a row — that’s the bare minimum. To get funding, you need to truly dig deep and be prepared.” 

To Successfully Fundraise: Play the Waiting Game

For startups that are actively trying to raise rounds right now, Immad cuts to the chase: “Just do not raise in the summer. Just wait.” 

Founders typically struggle to raise in June and July because VCs tend toward waiting out the summer. It’s a simple reason, too: Everyone’s on holiday, and it’s difficult to wrangle people into the same place. 

Beyond this, investors are gun-shy with the current markets, so they’re doubling down on due diligence, no matter how long it takes. 

September currently seems like the best time to start back up, but conditions are shifting with every week. Waiting for a strategic time also depends on your runway. 

• If your runway is very short — Do whatever it takes to get the cash. It can be internal, you can cut costs, or it’s time to raise your Series A. 
• If you have the flexibility — Many people do internal top-ups to breach larger milestones.

Historically, solid metrics from a fundable company look like $1 million in revenue with 15% in monthly growth, though this fluctuates depending on the industry. 

Ultimately, Immad stresses the golden combination for attaining funding: 

• Great metrics
• A sizable market
• A captivating story
• An impressive founder

“Ideally, your business is excellent in and of itself, and everything else will sort itself out. But getting there is much more work now than it was last year.” 

*Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust®; Members FDIC.

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