Venture Capital: VC World May Run at Half-Speed Over the Next Few Months
The coronavirus has disrupted networking, the lifeblood of the VC industry, or has it?
You get a somewhat mixed response to that question. Meeting an entrepreneur in person – that sine qua non of the venture industry – is usually not possible now. With lockdowns and social distancing so pervasive, here’s a look at what VC investors and founders think. (ETtech.com)
Some never-say-die founders are continuing their hunt for VC funding, only its long-distance, by videoconferencing. Tom Hulme, the head of Europe for Google Ventures, tweeted Thursday that he’d closed its maiden “fully remote deal.”
He added he was looking forward to many more.
Cristina Vila, the founder of London-based startup Cledara, made a pitch to investors over a video conference. She hopes to get a positive response by April.
Beware, the black swan
But despite the enthusiasm, the ride could be bumpy. VC giant Sequoia Capital proved prophetic when it called the coronavirus “the black swan of 2020” in a letter to portfolio companies earlier this month. The firm warned that financing could face a rough patch during 2020 and 2021.
In Europe, where, the virus is storming through Italy, Spain, and Germany, entrepreneurs that started their ventures after the global financial crisis, will have their first experience of a global black swan event. “This is the acid test for startups,” warned Jean-David Chamboredon, chief executive officer of French venture capital firm Isai.
With travel plans shelved and airlines planning to shut operations, it is inevitable that the number of deals will decrease, according to Berlin-based Cherry Ventures.
According to Paul Murphy, a partner at Northzone, European VCs can and will slow down their investing, and that there will be “fewer FOMO rounds.” However, the best companies will still get funded, in his view, albeit with a delay of a few extra weeks.
“Deal flow has quagmired,” confirmed Prashant Fonseka, a partner at San Francisco-based Tuesday Ventures. With the markets in a sharp decline, the VC industry participants will try to get a handle on the damage from the virus before committing. Fonseka expects delays of as much as 6-12 months on some deals.
“The world is running at half-speed for the next few months,” said Mike Volpi a partner at Index Ventures. “That said, I am totally confident that in some number of months, perhaps a year, we will all be back to our lives of hustle.”
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