COVID-19’s Impact on Early Stage Venture Capital

This may actually be one of the best times in history to raise early-stage capital.

Common knowledge at this point is that deal volume is down considerably from pre-crisis times, but less clear is how early-stage startups have been impacted since most coverage we’ve seen is focused on large later-stage funding activity. Also unclear is how much valuations have been compressed (especially in California where VCs have long felt valuations were inflated). And, perhaps most importantly, we’ve wondered if certain market segments have gained or lost favor during a time of heightened volatility and potentially long-lasting economic changes.

These topics are vital for the founders and investors we interface with to understand, so we set out to answer key questions by analyzing disclosed early-stage VC funding events occurring between March 1st through May 15th of this year versus the same period in 2019.

Are VCs still doing deals?

Yes, but at a significantly lower volume. Early-stage deals are down 44% when compared to pre-crisis activity. Seed stage volume is down the most, over 52%, while Series A deals appear much less impacted in terms of deal volume has dropped only 32%. Also, there doesn’t appear to be any renewed interest in CA-based ventures just based on deal volume.