Business as unusual — but we are still investing in early-stage tech despite the crisis
COVID-19 has shaken up the startup ecosystem and turned all of our lives around pretty severely. The impact and countermeasures undertaken by the government will be noticeable for the economy and private citizens for quite a while, and we’ve all had to adjust and reorganize our lives according to these new circumstances.
As an investor in early-stage tech startups, we at APX felt an impact immediately on our deal flow clearly correlating with the Europe-wide measures to fight COVID-19. Mid-March, the number of companies who applied organically for funding via our channels dropped significantly by 61% WoW. Organic deal flow channels, which in APX terms are mainly connected to Google searches, blog articles, and website visits usually indicate the natural market demand for pre-seed funding in the respective early-stage ecosystem. Combined with a slight decrease of deal flow through our partner network and the cancellation of event attendances, we observed the largest dip of inbound deal flow in the week after with a staggering decline of 79% WoW and 86% YoY — the market signals were strong.
When trying to properly understand these observations, the feedback we received from our founders and network was that many were busy trying to solve the immediate problems caused by the impacts of the pandemic and, understandably, most thought that this wasn’t the right timing and climate to go fund-raising in or start a new business.
Operational without fundamental changes
We at APX wanted to address this issue accordingly and send a clear signal: We’re still investing. We are operational despite the crisis, and we’re here for you as a partner. Even though our office in Berlin is closed at the moment and the desks will remain empty for some time, the APX program continues as before. As an investor, it is as relevant as ever for us to be meeting founders and to be signing term sheets — only now fully virtual.
This is not business as usual. But we’re trying to master business as unusual as well as we can.
A well-equipped early-stage tech sector
One of the big challenges among all industries today is to react and adapt quickly to unforeseen events like we are currently facing. The early-stage tech sector, being agile, prepared to deliver results, and for the most part independent of stock market results, is in a better position than many other sectors to navigate in this situation. This is why we will commit to driven and impact-oriented founders, continue to invest in great teams and to help our founders make a change.
Our approach has been to double down on reaching out to our strong network of investment scouts, angel investors, fellow VC’s and mentors, experts and investors, and on our virtual presence at events. And so far, this has had a positive impact on our deal flow activity.
‘Now normal’ vs ‘New normal’
Besides the hard business challenges and changes, we are all currently adapting to new ways of communicating and working.
While for many the crisis will bring unforeseen problems, it will also bring new opportunities for how we work together and what we perceive as ‘normal’. Remote work is here to stay, cutting deep into human nature and requires the breaking of old habits: Employers will have to learn to give up control over their employees and find solutions to incorporate trust. Corporates are looking for new ways to efficiently adjust their workflows. The digital world is gaining even more significance as a social meeting place. The acceptance of e-commerce is further increasing as is tolerance for digital products and the willingness to invest time and physical resources into a learning curve.
At APX, we think of the current situation as the ‘now normal’ — not the ‘new normal’ yet. The ‘now normal’ we live in is already different compared to three weeks ago and will be different from our ‘new normal’ in a couple of months. Let’s keep adjusting and discover the new opportunities they hold!
In the meantime, if you have a bold business idea — you have a solid partner in APX.
Moritz Kelm is an Investment Analyst at APX.
