During the early days of the COVID-19 pandemic, concern was high, public markets were suffering and it wasn’t hard to find wags on Twitter declaring that the world had changed and startup valuations were now off 40% — if you could put a round together.
But last night, we reported that more startups than expected were raising new capital at a higher valuations than prior rounds, an event often called an “up round.”
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The data looked remarkably steady. As Connie Loizos wrote, “so-called ‘up rounds’ only declined modestly, from 72% [of Silicon Valley financings] in March to 70% in April.” Hardly doom and gloom.
The notion that the funding environment is not as bad as it was anticipated has been borne out in other data, including what appears to be a falling pace of startup layoffs. Perhaps the sky is not falling for private, growth-oriented companies that we tend to call startups?
More data helps fill in the picture. Surveys from NFX, a San Francisco-based seed fund, and DocSend, a platform that some founders use to distribute pitch decks, detail how sentiment has changed amongst founders and investors alike. There’s some good news in the collected sentiments, albeit with a few warning signs as well.
What seems clear from the reports is that the purported startup apocalypse hasn’t come, provided that they weren’t serving or working in a sector of the economy that zeroed-out due to COVID-19.
Let’s dig into the numbers to better ground our understanding of how entrepreneurs and venture capitalists really view — and disagree on — today’s private markets.
Concerns and realities
TechCrunch covered the first NFX COVID-19 survey back in April, writing at the time that founders seemed a little more optimistic than venture capitalists when it came to the economy’s rebound and their short-term fortunes.