Funding pattern during and post Covid times
We have talked about the funding phenomenon changes since the pandemic in our earlier articles. The effect is very uneven on the funding in startups and scaleups and will continue to do so because of this Covid 19 situation. While on one hand , in the Netherlands, investments in startups decreased from €420 million in Q4’19 to €150 million during the lockdown in Q1’20 and on the other hand, Dutch startup investments reached a record-breaking €460 million which exceeds the same period last year by almost €70 million.
Pieter Welten, a partner at Amsterdam-based Prime Ventures, confirms this trend. The investors are being very cautious, careful and doubtful these days about their investments. They want the startup owners to analyse the impact of the pandemic on their business model and then prepare a proposal. When they see that the owners are prepared for any uncertainty , then they feel safe and secure about their invested money.
Some are predicting, on a brighter note, that things will steadily start going back to normal. German entrepreneurship researchers Kathrin Burmeister-Lamp and Tom Orben believe classic VCs will continue to invest. Corporate VCs on the other hand will not so much. They will be skeptical about it. And as a result the funding from corporate VCs has shown a decrease of 13% in Q1 2020 when compared to Q4 2019.
So what investors are looking for is that owners must maintain a cash cache or reserve for the business to run well in these tough times by cutting on certain not so important expenditures. To come out of a crisis stronger, founders must focus on the future and adapt to the new reality, KPMG states. The important qualities of being an entrepreneur plays a vital role in it. Being able to study the consumer behaviour in these tough situations will come to your rescue.
Ultimately, we do not just have to survive this situation , but also prepare ourselves for the future, the time after this is over. Even though COVID-19 has changed funding landscapes worldwide, VCs have still expressed interest in companies that see opportunities both during and after the pandemic. So founders must keep in tune with the changes happening worldwide and be ready for their company’s better future with use of their forecasting capabilities.