Like the United States States entered the first wave of COVID-19 blockades, there were wide expectations in the startup country that a showdown had come. But the expected reward of high-yielding, high-growth startups fueled by low-cost capital provided by venture capitalists raising ever-larger funds has not arrived.
Instead, the exact opposite happened.
The layoffs occurred quickly and aggressively during the early months of the pandemic era. But by the middle of the second quarter, venture capital activity had heated up and third quarter trading felt quick and competitive, with some investors describing it as the hottest summer in years.
Venture capital as an asset class survived the pandemic stress test.
But somehow lost in the garish megarounds and high-interest IPOs that may dominate the news cycle have been startups in the startup phase. The small raw farms representing the grain that will turn into the next series of giants.
ProWellTech explored what happened in the seed investment to find out what was lost amidst the storm and fury of late stage startup business. According to a ProWellTech analysis of PitchBook data and a survey of venture capitalists, some trends have become clear.
First, the pattern of increasing seed control size observed in previous years has continued despite the tumultuous business climate. Second, more expensive and larger seed deals weren't just caused by excessive capital in private markets. Instead, COVID-19 rocked startups that were considered attractive by private investors. And the change hasn't necessarily increased their numbers.
Let's analyze the data and see what it can teach us about this wild year. Then we'll hear from Eniac Ventures' Nihal Mehta, Freestyle's Jenny Lefcourt, Pear VC's Mar Hershenson and Contrary Capital's Eric Tarczynski about what they saw in 2020 as they wrote some of the checks that our data includes.
The US seed market in 2020
If you haven't thought much about the seed in 2020, you are not alone. Late, huge spins have consumed most of the media's oxygen, leaving smaller startups competing for attention gaps. There was so much late-stage activity - around $ 90 100 million or larger rounds in the third quarter, for example - that it was difficult for smaller investments to get attention.
But despite living in the background, the dollars invested in seed-stage startups in the United States had a mixed year that was fascinating:
Seed dollar volume declined as the first quarter progressed, reaching the 2020 nadir in April, the start of the second quarter. But with the arrival of May, the pace at which investors invest money in startup startups has accelerated, returning to January levels, i.e. pre-pandemic, by June. The COVID drop, for the seed, therefore, was a short-term affair.
