Startups in the Coronavirus Era: The Acceleration of Online Fundraising
Over the past decade, there has been an accelerating, long-term shift in most types of commerce and consumption moving online, and COVID-19 seems to be a catalyst to accelerating this shift. At SeedInvest, an equity crowdfunding platform which has successfully funded over 225 companies since its inception, we polled founders to gain a deeper understanding of how startups are responding to COVID-19, and how the economic climate resulting from this crisis has impacted their plans to deploy and raise capital.
Our main takeaway is that COVID-19 has slowed, but not stopped fundraising efforts, and has led founders to consider more alternatives to traditional venture capital. Below are highlights from the results of this survey.
Who are our respondents?
● Out of the 70 startup founders who participated, 28% are international, 22% are based on the West Coast, 15% are based on the East Coast, another 15% are based in the South, and the remainders are spread across the Midwest.
● The companies also fall across a wide range of industries, with the top represented sectors being: healthcare (19%), technology (19%), B2B SaaS (10%), and Entertainment(8%).
● The participating companies range from pre-seed to Series C, with a median $5.7 mm in total capitalraised.
The majorities of respondents are either raising capital or will be soon.
● 36% of respondents are currently fundraising, an additional 22% are looking to raise in the next three months, and a further, 18% are looking to raise in the next six months.
COVID-19 is causing founders to consider alternative sources of funding:
● 60% of founders said they were more likely to rise from a new investor or investors with whom they had not worked previously.
● 44% of founders said that COVID-19 made them more likely to consider online equity crowdfunding platforms for their next raise, vs. 52% who were no more or less likely to consider it and 4% who said they were less likely to consider it.
Fundraising is happening remotely, but a personal connection with investors still matters.
● The three most popular tools with participating founders were personal emails, phone calls, and Video Conferencing, with founders stating their experiences fundraising with these tools had been, on average, “Quite Positive” (8 out of 10). Meanwhile, their experiences with “cold” or mass emails, webinars, syndicates, and unsolicited outreach via LinkedIn had been “Quite Negative” (2 out of 10) on average.
Investment is still occurring, albeit a little more slowly.
48% of founders said that investors were just as responsive as before. Meanwhile, 37% said they were less responsive, and just 15% said investors were more responsive.
● 44% of founders said they are delaying or previously delayed a raise because of COVID- 19, vs. 23% who are accelerating the timeline of an upcoming raise.
In the COVID-19 era, remote working is here to stay, as is remote investing. In fact, pitching to investors or finding a crowd funding platform to help fund your business may be easier and more accessible than ever. With offices closed, founders no longer need to physically travel to tech hubs such as Silicon Valley to pitch their business idea. This larger secular shift that is moving traditional startup fundraising and investing online could be the new normal.