Pandemic, Future of Work & the Current Fundraising Environment

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As a data-driven investor, we constantly track data. Fundraising data. Market data. Economic data. Over the last month, one question persists —how will COVID-19 affect venture capital fundraising particularly in the Future of Work?

We decided to look at our data to understand VC fundraising over the last month and compare last month’s data with the same period last year. We also wanted to analyze a full year of data to compare year-over-year trends. The early indications suggest the fundraising environment has NOT changed as a result of the pandemic. In fact, as you see the data below, if you compare fundraising in Future of Work companies in April 2019 vs. April 2020, it was actually up 40% year over year.

Please keep in mind a few considerations. First, the data is based on actual fundraising announcements so there may be a lagging affect from when the actual investments were made. Nonetheless, we believe a few things are happening…

  1. In the “follow the herd” mentality of Silicon Valley, remote work has become a broad-based theme across all stages of investors.
  2. Highly competitive deals will still get funded quickly with little-to-no impact on timing or valuations.
  3. The large household names — those that have raised outsized funds over the last 2 years — are taking advantage of the uncertainty and being very opportunistic to land deals previously not in market.

That said, we also believe…

  1. Deals are still getting done but a “reset” is just starting to happen that will have a lagging effect on venture fundraising later this year.
  2. Valuations are increasingly being scrutinized and deals will inevitable take more time to close with increased dilution for entrepreneurs.
  3. Investor will be going to the edges, either early seed and later stage. We foresee many companies at risk in the mid-stages as a result of the “frothy” fundraising environment of the last few years. Many companies are “at risk” as a result of high burn rates, high valuations, increased concerns on churn, and stalled net new bookings.

I had a chance to share notes ideas with some fantastic investors focused on the future of work including Roy Bahat (Bloomberg Beta), Kara Nortman (Upfront Ventures), Naomi Ionita (Menlo Ventures), and Lan Xuezhao (Basis Set Ventures). I encourage you to watch a replay of the discussion (coming shortly). Even though I broke Roy’s “no predictions” format, it was a great discussion with wide-ranging topics on remote work, the impact of government, and the future of “shareholder capitalism”.

(Cross-posted @ Arcadian Insights – Jason Corsello)