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?
I’m glad you asked! First, come hear from 20+ of the top VCs in SaaS and Cloud for FREE at our next big digital event, the next SaaStr Summit: The New New in Venture on May 27th. Sign up here and early session registration is already open!
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.
