13/05/2020
How Covid-19 Is Affecting Fundraising For Tech Start-Ups
Published on https://startupfortune.com
Covid-19 has created dramatic changes in the way we work, and this is particularly true for startups. While a few businesses have seen some silver linings, many tech firms have noticed a slowdown. Unfortunately for startups, this also means fewer funding opportunities.
Covid-19 has created dramatic changes in the way we work, and this is particularly true for startups. While a few businesses have seen some silver linings, many tech firms have noticed a slowdown. Unfortunately for startups, this also means fewer funding opportunities. In a poll conducted among startup founders in the U.S., Europe and Asia, 78.8% said that the Covid-19 had slowed down some of their fundraising projects. In many cases, those who had made soft commitments canceled them because of uncertainty.
The situation may look darker before things start to improve. The National Venture Capital Association report expects venture capital investment to “drop significantly” because of Covid-19. The first 30,000 startup layoffs in the initial weeks of the crisis did not bode well. However, startups that are related to industries that may benefit from the crisis, such as live streaming or medical technology may still attract investors during the crunch.
There is some reason to hope for a rebound in venture capital investment, especially if the current Covid-19 resembles the 2008 financial crash more than the 2000 dot-com bust.
Although the 2000 dot.com and the 2008 financial crises both negatively affected fundraising for startups and valuations, there was a difference in startup recovery. After the dot com crash, there was a 25% to 30% decrease in deals and 10-20% lower valuation.
These numbers were similar after the 2008 financial recession, but the difference was that by 2009 and 2010, there was almost a complete recovery in venture capital activity and valuations, whereas there were several years of slowdown following the dot.com crisis. There is a reason to be cautiously optimistic that the Covid-19 ordeal will be more like the 2008 crisis, because neither crisis was directly caused by startup activity and the health of the tech industry, unlike the dot.com crisis.
Full article here - https://startupfortune.com/how-covid-19-is-affecting-fundraising-for-tech-start-ups/
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