Q: Are Silicon Valley VC firms suspending or significantly cutting down on startup investments during this pandemic given the vast economic uncertainties of this time, or is it business as usual?
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Let me tell you in 5 points what I’m seeing right now:
Nowhere in VC is it business as usual.
- First, everyone with a large portfolio is still doing triage. This is distracting, at best. Portfolio companies that seemed to be doing OK or even Great before are now in trouble. This takes a lot of time to deal with. And we aren’t remotely through it.
- Second, everyone is nervous. Yes, the stock market is still strong and cloud stocks are close to all-time highs. But everyone is still … nervous. This just slows things down.
👀 The @BessemerVP-Nasdaq Emerging Cloud Index traded up +2.7% today to close at $1,356, up +13% YoY and only -5% off of its global high of $1,423 👀
💰 Over $1Tr in market cap
❌ An average ~11x forward run rate revenue multiple
📈 Up +47% from its 52-week low in March pic.twitter.com/iquXsHMS8n
— Mary D'Onofrio (@mcadonofrio) May 5, 2020
- Third, it’s harder to meet. This is still an issue. VCs have not fully adjusted to remote investing.
- Fourth, hot deals are still getting done. But that probably means growing faster than before COVID-19. That’s what VCs are looking for. Start-ups accelerating because of COVID-19. Maybe 15% of start-ups are getting a COVID Boost. That’s what VCs want, no matter what they might think or say.
- Fifth, the bigger the check, the tougher things are now. Taking a risk on a smaller check and thus a somewhat earlier stage start-up with a lower valuation is often easier in more challenging times.