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DocSend Startup Index: Optimism is high, but runways are short

We surveyed 250 startup founders to learn how their businesses have been impacted by the COVID-19 pandemic.
DocSend Startup Index startup founder survey

As we move further from the initial shock of the COVID-19 pandemic, many startup founders are finding a new path forward. Today we released the DocSend Startup Index: The COVID Impact which is a snapshot of how startup founders were operating in the month of April. Because the survey was conducted at the beginning of the downturn, the goal was to highlight the immediate responses and decision-making processes of early-stage startup founders. In the report we find that founders not only quickly adapted to the new condition, many of them are also thriving. The majority of founders (65% of those who are fundraising founders and 60% of those who are not) are maintaining or growing their businesses despite current condition. What’s interesting though is that many of them report having very short runways to work with (we recently talked about adapting your fundraising approach).

How are startup founders adapting to the downturn?

For most founders actively fundraising, their optimism shows in their plans: 64% are not changing their target valuations. However, 50% of them reporting having to shift their fundraising efforts. This means either bringing them forward to raise more capital now, or delaying them to wait for potentially better conditions. But overall tech seems to be in a good place despite economic changes with 40% of startup founders who are actively fundraising and 33% who are not actively fundraising are actually seeing increased demand for their products as a result of the COVID-19 pandemic.

Despite the fact that the tone among founders in this survey was generally optimistic, they aren’t necessarily in the clear. More than 55% of founders who are actively fundraising say they currently have fewer than six months of runway. Only 9% of founders who are actively fundraising reported having more than a year of runway. Of course, these founders are in the process of seeking funding, but we always recommend having 8-12 months of runway in the bank when you start your fundraising process.

The process of pitching to investors has changed

Now is a great time for startup founders to adapt their pitch decks. They need to show investors that they’re thinking about how the economic downturn could impact their businesses. In the survey, founders reported that investors are asking for different information than they were three months ago. In fact, 32% of fundraising founders reported that investors want to know more about current market opportunity and why now is a good time to invest. Just under a quarter of fundraising founders reported that investors want to know more about their business model and finances.

Russ Heddleston, DocSend’s CEO, acknowledged the need for startup founders to change their fundraising strategies:

“One of the hardest parts of running a startup business — fundraising — has become protracted, unpredictable and almost completely virtual overnight. Without the benefit of an in-person meeting, founders are challenged with forging new relationships online, and through pitch decks communicating their business opportunity, strength of their team and product, and most importantly, ‘why now.’

“For founders that face an uncertain future and still have some runway left, now may be a good time to step back and re-trench. Instead of trying to raise money against serious headwinds, rethink your product plans, business model and other aspects of your business, and then wait for the market to improve.”

Today’s report is part of the DocSend Startup Index, which has been measuring the impact of the COVID-19 pandemic on startup fundraising for weeks. Click here to see a live-updated list of firms that are actively investing, or click here to learn more about how we are connecting startup founders to committed VCs.