Product Led Startup Accelerator | Raising Capital in a Pandemic times

Raising Capital in a Pandemic times

It’s no secret that Covid-19 has wreaked havoc on businesses everywhere. With a volatile economy, social unrest, record unemployment, and a general sense of exhaustion that hangs so thickly in the air that it could be cut with a knife, it’s easy for businesses in need of venture capital to feel a sense of despair.

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It’s no secret that Covid-19 has wreaked havoc on several startups everywhere. With a volatile economy, social unrest, record unemployment, and a general sense of exhaustion that hangs so thickly in the air that it could be cut with a knife, it’s easy for businesses in need of venture capital to feel a sense of despair.

It’s true that:

  • The first quarter of 2020 saw a 5% decline in GDP that sharply contradicted the 2.1% growth shown in the final quarter of 2019
  • Unemployment hit a high of 14%
  • Venture capital investments have plummeted in the time between May 2019 to May 2020.

The aforementioned data points are enough to leave anyone in the world of business—anyone at all, really—with a feeling of existential dread. But they also do not describe the entire picture.

Investing Has Not Ended

It turns out that even a once in a generation pandemic can’t stop big money. Venture capitalists are still out in the world doing what they do. They are just doing it over Zoom now.

Global funding between the months of January to May in 2020 was at about $82 billion globally--$10 billion less than the previous year, but also significant enough a sum to prove that major capital is still in circulation.

For all the problems that 2020 has brought, investments are only down 13% in the United States. In other words, there is still money on the table, even if it is somewhat more modest than the numbers seen in recent years past.

Raising Capital in a Pandemic

So how exactly do you raise capital in a pandemic that is as volatile as Covid-19? To understand this, one needs to take a look at the type of investments that are currently being made.

  • Seed funding and early-stage development investments are down about 20%--It’s not a great time to be the new guys on the block.
  • Certain technology companies, Facebook, Twitter, etc, have actually increased in value---Covid-19 has more than proved something that never needed proving. Tech is big and it’s here to stay.

What This Means For Startups Trying to Raise Capital

Clearly, it is still possible to raise money during a pandemic, for some people. The numbers seem to indicate that businesses who were well-positioned going into 2020 can still reasonably expect to raise capital during the pandemic. This is especially true of industries that are thriving in pandemic conditions. These include:

  • Healthcare (for obvious reasons)
  • Education
  • HRTech Startups
  • Productivity and Collaboration

On the other hand, companies that lack a high-quality product or a well-seasoned team may be better advised to try surviving the pandemic by buttoning down the hatches and hoping that before too long calmer winds will prevail.

For those that are in a position to think about fundraising, an attitude of caution is still recommended. In pandemic conditions, offers that might have once been unpalatable might now feel like a saving grace. In reality, the truth is that businesses do well to hold out for the right opportunities.

If you want to know more about how to raise funds during this time contact us at hello@product10x.com