Startup Investment During the Pandemic

Updated: March 15, 2021

The ongoing COVID-19 crisis has been a shock for our economy. Startups have been hit particularly hard by market turbulences and ongoing governmental restrictions. In many countries, government rescue schemes and packages have completely ignored startups.

But enough with the bad news. Contrary to what you might expect, the pandemic has not defeated dealflow! According to Atomico’s highly respected State of European Tech report for 2020, published in December, venture capital has continued to pour into the region.

• Seed rounds are growing in size with an increased number of $100m+ deals, and the continent was on track for another record year of investment at over $41bn.
• In March 2021, Hopin (which has seen huge demand for its software during the COVID-19 pandemic) has officially become the fastest-growing European startup ever, in terms of the time it has taken to reach a $5bn valuation.

The investment picture also looks good in North America, despite a politically, socially and economically turbulent year in the United States.
In every crisis lies opportunity – just ask Zoom! – and investors know this very well.
So there’s still every reason to be positive as a startup founder. But just because there’s money out there doesn’t mean raising funds just got easy!

How to approach investors in a time of crisis

Although the broader investment landscape remains better than many had hoped, it’s nonetheless true that investors are being more cautious than usual.
Some investors – business angels in particular – are focused on keeping their existing commitments afloat. All they’re doing is looking after their portfolio companies. And many venture funds have reacted the same way.
But as we’ve seen, plenty are still open for business. One thing to be aware of is that some of them might look for ‘bargain deals’ during the crisis.

STAY CALM

It’s important to stay calm in all your decision-making. Even if you desperately need funding, don’t just contact hundreds of funds. Remain rational. Make sure you target proper introductions to the investors who make the most sense for your business. Read investment criteria carefully before you reach out to investors.

Pitching online is also quite different from pitching in person – we recommend watching this free tutorial video to improve your skills.

EXTEND YOUR RUNWAY

Also, remember that this is not the time to be overly aggressive. This is a serious crisis and you should hit the brakes if you face uncertainty. Cut your burn rate, extend your runway. Down-rounds might be inevitable and the mid-/long-term reality of this crisis could be a long fundraising winter. Keep an eye on the valuation impact of your decision, with tools like DealMatrix.

BE PREPARED

Come up with a survival strategy and be ready to explain it to investors – as well as answer their challenge. VentureBeat covered the big questions you need to ask yourself in this article written at the very start of the crisis – the advice in it still holds.

We highly recommend applying to the European Super Angels Club – Europe’s leading investors’ network – if your company is within the investment scope of the club. Venionaire Capital’s analyst and transaction team support the club with startup selection – in partnership with KPMG Austria. Members range from family firms and high-net-worth private individuals to corporate venture capital funds. The network includes thousands of potential investors who are open to investing during the pandemic.

If you need any assistance – don’t hesitate to reach out to us. We support startups in fundraising on a daily basis. Who knows, maybe we have a fit and we can leverage your efforts to raise a successful round.

About the author: Berthold Baurek-Karlic is the Founder and CEO of Venionaire Capital, with many years of experience as a serial entrepreneur, corporate finance expert, and early-stage investor. He supports the startup ecosystem in various roles such as President of the European Super Angels Club, Board of Austrian Private Equity and Venture Capital Association, and General Secretary of Business Angel Institute.