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How to raise funds in a recession: 5 tips for startup founders

Venture capital funding in 2023 has been a lot harder to come by with investments declining sharply during the first half of the year. This is mainly due to high interest rates and fewer IPOs resulting in fewer exit opportunities for investors. In spite of this harsher landscape, it is still possible for start-ups to raise funds.

We have set out below 5 tips for founders to achieve a successful fund-raise.

1. Leverage existing investors

Existing investors know and are already invested in you and your business. They want your business to be a success so are more likely to be willing to support your business to reach the next stage. Reward existing investors’ trust in your business by being open with them about your vision and be clear with them about your goals and successes that you are on track to achieve.

Create a list of your existing investors and consider which ones may be best to approach based on questions such as:

  • Do they have spare capital to invest?  
  • Do they have industry experience and/or knowledge?
  • Are they the right choice for your current funding stage?

You can find out more about the key funding stages for start-ups in our article.

2. Consider alternative sources of funding

If existing investors don’t have the capital or inclination to invest, then consider alternative funding sources. Before you seek any funding, however, make sure that you have calculated how much you will need to achieve your goals. You don’t want your business to take on any unnecessary debt at a time when the cost of borrowing is high.

Nurture new business relationships

Existing investors can be a good first call for seeking additional funding, however, don’t forget the importance of continuous marketing and networking to establish and foster new business relationships. These new leads could provide a critical injection of cash when you need it most.


Crowdfunding is a method of raising funds by asking a large number of people to invest small amounts of money towards a business or venture. This is done normally via an online platform but could also be launched as a campaign on your own website and shared on social media. You can find out more about crowdfunding in our article.

Peer-to-peer lending

Peer-to-peer lending offers founders access to loans without having to go down the traditional bank route. It is a platform which connects borrowers and lenders through a broker who charges a fee for the service.

Friends and family

Borrowing from friends and family can seem like an obvious and convenient source of financing for start-ups but there can be heightened emotional and financial risks. If you are considering borrowing in this way, we will be able to guide you through the options and offer to make the arrangement formal so as to reduce the risks to your business if disputes arise further down the line.

Grants and loans

Governments and charities may provide funding or grants for start-up businesses in certain industries or with particular objectives which they may be supporting at the time.


Two heads are better than one! By collaborating with other start-ups, you may be able to share ideas and contacts and also raise more money as a collective.

3. Consider restructuring your budget

One crucial way to conserve the cash in your start-up during a recession is to tighten the purse strings. Think of ways to reduce the operational costs and fixed costs of running your business as much as possible. For example, asking teams to work from home rather than spending money on renting office space and cut back on expensive advisor costs by looking into more innovative alternatives.

4. Consider investing

Consider making your existing cash work for you by investing any spare cash wisely in high-interest accounts or funds and strategies which could help you better weather an economic downturn.

5. Create and maintain a data room for your business

During a recession, investors are naturally more cautious about where they are investing their cash and it is therefore critical that you have the facts and figures (and any supporting documentation) ready and up-to-date if investors want to conduct due diligence on your business. Creating and maintaining a data room allows you to gather all the information into one place and give access to investors quickly and professionally.

In summary, keeping an open mind and getting organised are two of the key tips to raising funds during a recession. Our funding experts will be happy to help you with guidance and advice on any questions or concerns you may have on raising funds and can help you put in place the necessary documentation and frameworks to raise the finance your business needs while minimising the risks. Contact us on 0800 689 1700 or fill out the short enquiry form below and a member of our team will be in contact.

About our expert

Jas Bhogal

Jas Bhogal

Corporate Partner
Jas qualified as a solicitor in 2006. She has 12 years' experience working almost exclusively with start up companies, high growth potential SMEs, along with venture capitalists, other investment platforms and individual and corporate investors.

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