Pre-IPO Profits

Deal Quality in This Crisis Hasn’t Changed – Yet

Deal Quality in This Crisis Hasn’t Changed – Yet
By Adam Sharp
Date April 14, 2020

The deal flow for startups that I’ve been seeing so far in this COVID-19 crisis has been pretty typical. Nothing too out of the ordinary.

There’s a good reason for that. These deals typically take months to put together. So most of the investment opportunities we are seeing today were in the works well before the COVID-19 crisis began.

I believe both the type of investment opportunities and the deal terms we’re seeing for startups will change soon. Deals that involve real estate, physical businesses and other areas hard-hit by COVID-19 will likely disappear.

I expect to see more startup investment opportunities in areas like video games, remote work, productivity tools, software and biotech.

A few of the strongest startups may also be able to pull together a syndicate to give them a “bridge round” to get them through to the other side of this crisis. And those could be very interesting opportunities.

The valuations of deals should drop on average, as well. Many venture capitalists and angels invest only when they can meet someone in person, and that’s out of the question now. So a lot of early-stage investors are essentially “on hold” while this crisis goes on.

In general, I also expect the number of potential investment opportunities to drop significantly. But on the positive side, the average quality of these startups should increase. Only the strongest and most determined startups will be able to raise if this continues to be a difficult environment (and I do expect it to continue to be difficult).

Top Posts on Early Investing