Based on data from the 250 surveyed founders for our DocSend Startup Index: The COVID Impact report, we found that during this economic downturn, founders are streamlining budgets and operations. Only 22% of companies surveyed haven’t cut any costs at all, while 33% of them have reduced variable spend such as marketing budgets and 24% have instituted a hiring freeze. Below, we feature a few key metrics on cutting costs from the report and our Q&A interview with Gil Ben-Artzy of UpWest.
The Active VC List keeps growing
The list updates live with additions from our fundraising community. Since last week, there have been 18 new firms added to the list, for a total of 325, including Accel, Chicago Ventures, and Founders Circle.
Q&A with Gil Ben-Artzy, Founding Partner at UpWest
Gil Ben-Artzy is a Founding Parter at UpWest, a Silicon Valley-based Seed fund that invests in startups innovating at the intersection of US-Israel tech ecosystem. Here’s what he thinks about fundraising during a crisis and how founders can manage with a short runway.
We recently did a survey and found that 65% of the founders we talked to reported that their business was either maintaining or growing. Do you think that’s reflective of how adaptable tech has been during the pandemic?
The pandemic has rattled many economies around the world, with small businesses being particularly negatively impacted. At the same time, it has also accelerated major tech trends around digital transformation, e-commerce, and platforms to support working from home, to name a few. Many tech companies have developed critical products that support these changes, and are indeed experiencing greater demand.
Another interesting finding was that only 9% of the companies fundraising had 12 months or more of runway. Do you have any advice for founders who are currently raising on short runways?
Raising capital these days has certainly become much tougher than compared with only a few months ago. Some founders may be able to tap into new sources of capital they did not previously consider, such as government grants or funding allocated for specific domains. Others could reach out to their customers and try to get paid upfront. However, startups must continuously challenge themselves to optimize their operations in correlation with the new economic realities, as well as engaging with existing investors to provide bridge financing. But ultimately there’s no silver bullet in these cases, with each startup needing to find creative ways to extend their runway.
When looking at pitch decks during the current climate is there anything specific you want to see?
My sense is that there will be greater emphasis on how the founders view their domain in a post-COVID world, and how their venture will play a critical part in it. In addition, planning for a longer than usual runway is going to be on investors’ minds so that you’re able to withstand an economic recovery.
Many founders we spoke with report that they’re sticking with their current valuations despite the economic changes. Are you seeing any major shifts in valuation?
For early-stage startups, we are seeing lower valuations to some extent, in the 20-30% range. However, the main shifts we’re seeing are more in the number of rounds that are being completed these days, as some investors are increasing their capital reserves allocated for their existing portfolio.
Is there anything you think founders should be thinking about right now or anything you want to add?
It’s tempting for founders to play defense, focusing on internal operations and product. However, this may be a great time for some companies to be more proactive, both with capturing a larger market share with targeted customer campaigns, hiring new talent you may not have had access to before, exploring new markets, etc. This is the time when strong products and teams can gain meaningful momentum.
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