How COVID-19 can change the venture capital investment landscape forever
In recent weeks, it has become very clear that even after the pandemic has been left behind, consumer habits, preferences and expectations of companies will change dramatically, even permanently. To that end, let’s explore how companies and startups are expanding their avenues to survive beyond COVID-19 and what the investment landscape may look like in a post-pandemic world.
Fundraising in the COVID-19 era
After years of unprecedented growth, especially between 2018 and 2019, venture capital firms and investors have now begun to be cautious about new investments, according to a GritDaily report. A weakened economy, along with certain sectors, such as travel, mobility and hospitality, which are witnessing record low demand, means that many early and late startups are turning to new strategies and business models.
Indian travel company MakeMyTrip, for example, announced a shift from its core business to delivering gourmet food online. The company has reportedly partnered with the country’s top hotel chains, including Marriott, Hilton, and Hyatt, among others, to explore alternative sources of revenue. This news comes at a time when comprehensive food delivery platforms like Swiggy are also rolling out new features like peer-to-peer courier services and grocery deliveries, while reducing volatile businesses like their cloud cooking business.
LironWinberg-Retzkin, General Manager of the 365x scaling program in New York, recently said:
“Most companies will survive this epidemic crisis and come out even stronger. Some of them will even have fewer competitors. “ It also highlights that tech investors and venture capital money tend to be well versed in the risks of investing in startups.
According to experts, the amount of capital required by startups will only increase as they attempt to not only target new markets, but also retain existing consumers after COVID-19. This will be an important consideration for many consumer-oriented startups that have been forced to cope with changes in consumer habits and expectations. In the short term, e-commerce companies, for example, will have to rebalance their inventory and distribution mechanisms to account for reduced sales of electronic products and clothing.
While investment has always been about the long game, that statement seems even truer now that the global economy is stabilizing its pace. Consequently, venture capital investors will have to strategically choose their investments to ensure that new portfolio additions align with their exit strategy, risk profile, and return on investment. Similarly, existing startups will need to review growth expectations, and stakeholders will eventually make similar adjustments.
Identification of the “correct” investment
Identifying the exact schedule of an investment can be a challenge, as factors such as the extent of disruption due to COVID-19 can vary for different startups. The increasing number of uncertain variables is precisely why the recent trend in algorithmic venture capitalism may not be very successful in a post-COVID world, at least for a time. A partner at venture capital firm Openview told MIT:
“Everyone refers to venture capital as a pattern match, which is very true, but an anti-pattern match is also being made. Venture capital returns come largely from the backing of unique outliers that are often they see themselves as the anti-pattern in their early stages. “
To that end, the identification of promising companies will again fall on the intuition of investors, just as during the aftermath of the financial crises of home mortgages and dot-coms. If there’s one thing to learn from those events, it’s that today’s startup unicorns tend to be among the most ignored when they started. Companies like
OddupHowever, it helps venture capital investors by allowing them to stay ahead by offering streaming data in the global startup ecosystem. Oddup’s proprietary startup data solutions include
Oddup Score and
Reference assessment metrics, which give decision makers a quick look at the health and valuation of any startup.
As COVID-19 ushers in a new era, it is clear that success in the venture capital space will only be found by those who are willing to stay ahead and identify emerging patterns. However, it remains to be seen whether the pandemic will be as disturbing and monumental as the two previous financial slowdowns of this millennium.
Disclaimer: This article was produced on behalf of Oddup by the Times Internet Spotlight team