Venture Capital in the Time of Coronavirus

Billions of dollars have flowed into startup investing this decade, but the era appears to be closing with the coronavirus pandemic. Limited partners are saying no to younger venture firms who are still out raising, while cutting back on weaker existing firms in their portfolios, Connie Loizos reports on TechCrunch this week.

Other firms with direct ties to public markets are losing even more access to working capital. Connie thinks we will soon see term sheets getting pulled using force majure clauses (and in fact we’ve been hearing a few rumors). In another sign of pressure in the funding ecosystem, Danny Crichton hears that some investors are preparing for layoffs at their own firms.

With the pandemic’s impact just starting to be felt across global economies, everyone is bracing for hard times. So, if you’re a startup with fresh funding in the bank, Danny suggests that now is an especially good time to make a funding announcement that stands out.

Over on Extra Crunch, we’ve been going deeper on what startups and investors are facing and how they can adapt. “I expected 20-30% declines in valuation, but I would up that today to 50-60% in the earliest stages based on feedback I have heard,” Danny details in his latest update on pandemic fundraising trends.

Alex Wilhelm interviewed a growth-stage investor who thinks that Q4 may be the earliest that bigger startups will be able to do raises — and probably not from new investors right away. Everyone is trying to support existing portfolios too.

But what is really changing, when you look at the time scales of startups? Here’s an even-keeled view from long-time VC Mike Volpi, in an interview with Connie this week:

“[The business of venture is a very long-term one. For the average holding period we have within our portfolio companies is probably eight years. If you think about an investment that we made even, let’s say, last year, it’s going to look really different seven years from now. So these moments of fluctuation for us as VCs shouldn’t impact our thinking too much. They’re unpleasant. You have to be thoughtful about how to manage through them. But from an investment perspective, we shouldn’t really let it get too much in in the scope of how we think about it.”

The great unicorn stall?

Alex had been writing a popular series on companies on their way to IPO. Now the window on hundreds of unicorns appears to have closed for months if not longer. “Procore and Accolade, for instance, have filed publicly to debut but have yet to price and pull the trigger on their offering,” he writes on Extra Crunch this week. “Asana and DoorDash and Postmates have all filed privately to go public, but given the insane repricing of their comps on the public markets, no public filings appear to be in the offing.” He then breaks out Airbnb’s particular situation as a travel unicorn in a time of frozen borders.