Welcome to 2021, A year that could increase disruption and overcapacity in the 2020 startup market – or change patterns that previously performed well for early-stage tech companies and their investors.
As we turn the page, I have many questions that are worth raising as we did in 2021.
Each relates to the 2020 change that is expected to persist rapidly on the general market or startup. I want to know what needs to change to move the new normal that happened last year. After all, it’s okay when it realizes that nothing can shake off the slowdown (or boom) that things often do.
1. How long can the seeds remain warm to make a deal?
As 2020 came to a close, Natasha Mascarenhas and I reported On a strong year of seed investment and its particularly strong second half. How long can that pace last?
Today almost all of our questions are concerned with endurance of certain conditions, namely: how long a market startup can keep parts of the land red-hot.
When it comes to seed-dealing, Q1 and Q2 2020 saw similar levels of investment in the United States. But Q3 proved to be explosive, with investments ranging from $ 1.5 to $ 1.6 billion in domestic seed deals during the first two quarters in the July-September period.
Q4 numbers are yet to arrive fully, but it is clear that private investors were incredibly bullish on early-stage startups in the second half of 2020. How long can this continue? I think the answer is for a while now, as investors have shown enthusiasm to slow down their buoyant synergy.
While the synergy is generally hot, seed deals should remain hot as there is an increase in the number of investors who are willing to invest early.
Which brings us to our second question:
2. How long can investors keep writing such quick checks?
A topic that cropped up in the second half of 2020 was the speed at which investors were conducting venture capital deals. This was due to some reasons. To begin with, venture capitalists have raised large sums of money in recent years, meaning they need large returns to complete math work. This led many investors to work in smaller and smaller companies, hoping to win big. That setup led to more competition and faster deal-making.
how? Two things. Investors who were already on the startup’s cap table – already part-owners, in other words – led the preemptive rounds, in part to overtake other investors who want to hunt for a successful deal. Other investors, knowing this, seemed to do the same math and move faster, and at first, to hedge.
So how long can the trend last? Given that many large VC firms picked up in 2020, many startups picked up a few tailwinds from the COVID-19 economy and quit forever? Until something stops the things? Consider this Newton’s first law of startup investment.
What could be the sudden effect to set the current circumstances that would speed up the seed and subsequent deal? An asteroid strike is probably too extreme, but inertia is one hell of a drug and loves markets to be happy.
Moving along, all the competition to get money to work in hot startups now There is another effect than the mere pace of bargaining; It has also raised prices.