Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
How quickly our world has changed. In late February, TechCrunch covered the news that TripActions, a unicorn four times over, had secured a $500 million credit line to help it scale its corporate travel-focused business; however, it became known yesterday that TripActions is undergoing stiff layoffs after the corporate travel market transformed from growing to moribund in light of the global outbreak of COVID-19.
Many aspects of the public market are now different: public companies are pulling guidance; the Olympics is postponed; domestic life has been overturned by lockdowns and social distancing recommendations; and at the heart of what this publication covers, the venture capital scene has changed as well — not that you could tell from reading Twitter, mind. VCs love to tweet that they are still writing checks, and in some cases, it’s even true.
Inside the investor community, however, there’s some calling bullshit on the idea that the venture capital market is matching anything like its prior pace of business. Here’s Gil Debner from Angular Ventures:
VC market has completely locked up. Growth stage bankers are reaching out to me (a very early-stage fund) to see if we want to join $10M rounds.
— Gil Dibner 🇮🇱 (@gdibner) March 24, 2020
And fintech angel Sheel Mohnot:
Just saw a company with a verbal $1.5m at $15m seed+ round from their lead seed investor become a $500k at $10m offer. Lots of this happening out there.
— Sheel Mohnot (@pitdesi) March 23, 2020
Founders are feeling the pinch. To better understand what the fundraising market is like for entrepreneurs today, TechCrunch asked founders to write in with fundraising stories. Below, we’ve compiled a fair number.
Many people asked to remain anonymous so most anecdotes are shielded. Normally, I wouldn’t grant such broad protections. But we’re all learning together, and I’m not after any particular point, so we can be generous. (Write in if you have your own story, and we may include it in a future piece.)
Deals and dreams
What founders sent in ran the gamut, but mostly fell into two camps:
- Deals were kaput and few (if any) investors are writing checks.
- While the investing market had slowed, it was still moving some, if only a little.
As a final programming note, I’ve mostly kept original formatting from the notes that were sent in; in some cases, very light edits have been made.
Deals are dead
As you might imagine, founders experiencing the worst fundraising duress were the most circumspect about what they were willing to share for publication. Several of those founders wrote in with recent stories about funding rounds that stopped dead in their tracks as investors pulled out or went ghost. However, some entrepreneurs were willing to share a bit more.
One founder in the travel rewards space said their angel round did not close and previously interested angel investors simply stopped responding. Verbal commits to the deal also “disappeared” as COVID-19 rose and the public markets fell, harming investor net worth.
Raphael Danilo, a co-founder at Yobs Technologies and an angel investor, told TechCrunch that while “many VCs are posting on social they are ‘still in business,’” they “will not do deals for the next two months.” That’s a long gap given the number of companies that would have raised in the 60-day period if nothing had changed.
Another founder who is raising told TechCrunch that while their round is continuing (with investors fretting about check size, valuation and more), they were told by their own investors that some 90% of funds are not writing checks today. The same founder closed by noting that due diligence was set to get more serious than it was mere weeks ago.
Deals are slow, but alive
Micha Benoliel and Daren McKelvey from Nodle, a former Startup Battlefield company and IoT-focused startup, told TechCrunch that “ongoing discussions we’ve been having with investors haven’t slowed down.”
“Most investors remain excited about the opportunity and the future of the company.” the pair said.
However, the pair also reported that investors are “taking more time than usual” with “their review of the investment documents and getting the signature.” The duo said “the direct effect of COVID-19 is an expected delay in deal closings by at least one month.”
The Nodle team also noted that talks with new investors “have stopped.”
In the middling camp, Jubair Jalil, co-founder and CEO at Metapair, told TechCrunch that while “angels and investors (<$10M AUM) seem to be still moving quickly,” not all the news is good. “Funds are moving and rescheduling meetings,” Jalil said. (Jalil also noted that he’s seeing “a strange increase in inbound requests from investors (mainly from Linkedin),” which is both odd and interesting.)
Another entrepreneur who reached out to TechCrunch said that while some investors are feigning illness, some referrals continue to proceed. This note was one more point for the “mixed bag” perspective.
What’s lacking from this post — what I thought would constitute a third “bucket” of replies — are notes saying that the funding environment is kicking ass and checks are flowing. Of course, larger firms raising bigger checks are less likely to email in stories as less-encumbered founders, but the nearly utter void of very positive responses feels noticeable. (Indeed, TechCrunch has yet to see a real slowdown in $100 million and larger deals.)
But don’t stop writing in founders. Share what you can; we’d all like to know what you are seeing.
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