The Q3 Early-Stage Investment Climate and 2021 Forecasts

Christel Deskins

There is still a lot of uncertainty about how COVID-19 will impact startups, specifically the early-stage investment climate. 500 Startups, a leading global venture fund and seed accelerator, decided to survey its investor community in Q3 2020 to get a sense of how investors are responding to the new challenges brought on […]

There is still a lot of uncertainty about how COVID-19 will impact startups, specifically the early-stage investment climate. 500 Startups, a leading global venture fund and seed accelerator, decided to survey its investor community in Q3 2020 to get a sense of how investors are responding to the new challenges brought on by COVID-19 and their plans for 2021.

As a follow up to the firm’s April 2020 survey, The Impact of COVID-19 on the Early-Stage Investment Climate, this second installment takes a look at the current startup investment landscape, whether Q2 and Q3 met expectations, and what may be in store for 2021. 

Many respondents reported that investment activities remain the same as planned before COVID-19 or even increased, and valuations as expected or higher than anticipated.

With many deals still taking place, there is more interest in industries that solve problems brought on by COVID-19. These industries include healthcare, remote work, productivity, logistics, and mental health.

However, investors also appear to be becoming more risk-averse at the early-stage. There are strong indications that pre-seed investments will fall in the new year, with seed-stage investments remaining more or less the same. Approximately one-quarter of angel investors and family offices said they’ve actually increased their investment activity since COVID-19 began. By contrast, three-quarters of Corporate VC respondents said they would be investing significantly less in the coming year. 

There are still mixed sentiments on current valuations (as of Q3 2020). Some investors (39.3%) said that they feel valuations are currently higher than they expected, while a similar number (40.6%) said valuations are on par with their expectations. In contrast, 20% said they feel current valuations are lower than expected.

The entire venture capital community is currently reassessing their investment activities, and many are re-focusing on solving problems directly related to the crisis. For more information about the impact of COVID-19 on early-stage investing, download the survey here.

500 Startups is a global venture capital firm with a network of startup programs headquartered in Silicon Valley. The firm has invested in over 2,300 companies via its five global funds and 15 thematic funds dedicated to specific geographic markets and verticals. Its 100+ team members are located in 20 countries around the world in order to support the 500 Startups global portfolio of investments which spans more than 75 countries.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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