The global Coronavirus pandemic has left startups bruised and battered. Liquidity has been dried up for investors to deploy surplus capital into new ideas.
Startups and early-stage investors hoping to get back in deal-making mode later this year might have to wait for a much longer period before things get back to as normal as they were before Coronavirus pandemic. Out of 139 startup investors globally, over 62 per cent believed that startups and early-stage investing community will experience the impact of COVID-19 for up to two years before things settle down, according to a survey by famed seed accelerator and early-stage venture fund 500 Startups. 10-year old Silicon Valley-based fund is among the famous startup accelerators and funds globally having churned out over a dozen unicorns including Grab, Credit Karma, Twilio, Talkdesk, GitLab and more.
The global Coronavirus pandemic has left startups bruised and battered. Public markets have taken a significant hit and so liquidity has been dried up for investors to deploy surplus capital into new ideas. The focus has been now on conserving cash for existing portfolio startups. The survey claimed that for the majority of investors their investment allocation to startups will decline due to Covid-19. Nearly 14 per cent said the change would be 51-75 per cent less than usual, close to 17 per cent believed 26-50 per cent decline while 11.51 per cent said the allocation would be 10-25 per cent.
“VCs are doing the same thing that angels are doing. Because it is isolation, you are not able to talk to startups. How long and how many deals can you close by connecting online. You cannot move from one building to another. You cannot close deals like that. Also, I know a lot of portfolio companies will miss their growth projections since a lot of cash is diverted to Coronavirus-related expenses. Coronavirus will be one major factor for startup shutdowns or failures in 2020,” Padmaja Ruparel, Co-founder, Indian Angel Network had told Financial Express Online.
According to the data intelligence company CB Insights and PwC, global VC funding declined 10 per cent in Q1 2020 from the year-ago period. VCs poured $50.7 billion across 3,344 in startups across the world. On the other hand, the impact of Covid-19 has also triggered the interest of investors in sectors that weren’t as attractive as e-commerce before the pandemic. Among the top sectors seeing increased interest in the affected industries this year are healthcare, remote work solutions, logistics, productivity software, mental health etc.