Not every company wants to raise money right now.
In fact, startup executive Nadia Tatlow and her team intentionally chose to postpone the close of a funding round for her startup. The company believes it can command more money at a higher valuation later.
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Tatlow is CEO of Victoria, British Columbia-based Shift, a self-described “desktop productivity hub” that helps people manage a variety of different apps and accounts across work and personal life.
The Canadian company was on the verge of closing a Series A round this spring after starting the fundraising process earlier this year.
“We were not at the end of it, not at term sheets yet,” she told Crunchbase News. “But we were moving pretty quickly along with a bunch of firms that we were talking to, and were in the due-diligence phase.”
The goal was to close in April. But then the coronavirus crisis escalated and, suddenly, everything changed.
“I was in Palo Alto meeting with a few of the firms in early March,” Tatlow recalls. “I was supposed to be going to SaaStr but then that got cancelled.”
Tatlow made the call then to close Shift’s office and “send everyone home.”
She also began to reevaluate the notion of moving forward on the fundraise, which would have been a $7 million to $8 million Series A.
“We had a ton of momentum around our growth and traction,” Tatlow said. “We were planning to raise [in order] to leverage that momentum. But everything outside our control started to look uncertain.”
Timing is everything
The company immediately focused on minimizing its cash burn in an effort to extend its runway. March, as it turned out, was its biggest month yet.
“We see a lot of opportunity with Shift being a productivity app for working from home,” Tatlow told me.
The software-as-a-service company does a lot of paid advertising on social media channels and found that the cost of advertising had actually dropped due to the coronavirus.
“So we’ve actually been able to reach new audiences, and are seeing increased traction with people who wouldn’t normally have gone out looking for the best work-from-home setup,” Tatlow told Crunchbase News. “We were already working on an enterprise model, so in some ways this gives us an opportunity to be more laser-focused on that roadmap, and keep our heads down without the distraction of a fundraise.”
As a result, she made the decision to postpone all the conversations with the VCs she was talking to.
Also playing into that decision was the belief that a new portfolio company would get less attention than existing ones.
“A lot of VCs were saying, and rightfully so, that they were looking inward at existing portfolio companies in crisis mode,” Tatlow said. “Being a new investment would mean that we would fall down on the priority list early. By waiting until things are more level and predictable, that will make it a much more efficient process when we do raise.”
Shift saw annual recurring revenue growth of 300 percent in 2019, she pointed out, and is currently sitting on about $3 million in ARR.
“We’re growing very aggressively,” she said. “And now we’re layering an enterprise layer for collaboration at work. So when we do raise, we’ll have an even higher value product offering and a better understanding of what’s going on in the market, as well as of terms to expect in our raise.”
Shift hasn’t had to change course or pivot the core value of its product in any way, said Tatlow.
“The market has just grown,” she told Crunchbase News. “We’re just optimizing for the best potential raise, at the highest valuation with the most value-add from VCs.”
Illustration: Li-Anne Dias