As many of our readers know, we track fundraising market activity on a weekly basis with our Pitch Deck Interest metrics. These can be leading indicators for the health of the fundraising market, which can impact all players in the startup ecosystem. In today’s newsletter, we wanted to dig deeper into the data we collected over Q2 and what we might expect for Q3.
Our Q2 data shows a very active fundraising market, expect more deals in Q3
This week, we released quarterly data based on the Pitch Deck Interest metrics that show venture capital investor interest and engagement in startup pitch decks were up 26% in the second quarter of 2020, compared to 2019.
Investor interest is breaking the seasonal norms
“Typically, we see a seasonal decline in both links created and overall interactions that starts in mid-May and extends through the summer, that’s clearly not the case this year,” said Russ Heddleston, DocSend co-founder and CEO.
“While many startups have endured cost-cutting measures and rounds of layoffs during the pandemic, a portion of companies with the right business models and market opportunities are being met with open arms by investors who are again becoming eager to source deals.”
The top 10 weeks for interest in 2020 were all in Q2, peaking at week 25 (June 15) with 20.6 interactions per founder. Since last week, we’ve seen investor interest climbing back up towards that record-high indicating that this summer continues to be more active than the traditional summer slump.
What do we measure? Key Indicators of VC Interest and Engagement
The Pitch Deck Interest metrics are part of the DocSend Startup Index and measure activity via three key indicators of investor engagement. The insights help startup founders better understand fundraising conditions, especially in the volatile COVID-19 landscape. The Index anonymizes, aggregates and compiles metrics in real-time and reports on changes via interactive charts on a weekly basis, focusing on three core metrics.
Pitch Deck Interest – the average number of interactions for each pitch deck link created by founders on the DocSend platform, which can serve as a proxy for demand. The higher the interest metric, the more often decks are being viewed, shared, and revisited by potential investors.
Founder Links Created – the average number of pitch deck links each founder is creating on the DocSend platform, which can serve as a proxy for supply. When the average number of links increases, it means that founders are creating and sharing more unique links to their pitch decks, meaning they’re sending their decks out to more people.
Time Spent – the average time spent per pitch deck by potential investors. This metric offers a look at how long VCs are spending reviewing deals. More time spent per deck could mean investors are more closely scrutinizing deals.
Founders Race to Raise Capital Amongst Uncertainty
Per founder, there was an 11% increase in the number of unique links created for Q2 year-over-year — 5.87 links in 2019 vs. 6.52 links per founder in 2020, meaning founders are casting a wider net and sending pitch decks to more investors than in 2019. With COVID-19 stressing budgets and timelines, this could be a result of founders compressing their fundraising efforts by sending decks to more investors at once.
Along with year-over-year increases, links created in Q2 were substantially higher than Q1 — 6.52 vs. 6.31, a 3% quarter-over-quarter increase.
Resource: Startups raising capital can apply to join the DocSend Fundraising Network. You’ll get detailed, data-driven feedback on your pitch deck, and if you qualify, we will provide a warm intro lead investors in our network.
Investors Aren’t Wasting Any Time
Additionally, the average time investors spent reviewing decks was down 10% quarter-over-quarter in Q2 of 2020. This means that when investors chose to review a deck, they spent less time scrutinizing the information and made their decisions to meet with founders one-on-one more quickly. Also, this may be a side-effect of investors tending to more easily agree to virtual meetings with founders versus face-to-face meetings.
“While a lot of VC attention in Q1 was focused on existing portfolio companies, and is therefore reflected in a drop in new Q2 deals and funding amounts, investors have spent their time in Q2 searching for new opportunities,” said Heddleston. “We expect this activity from Q2 to translate into more deals during the second half of the year, taking into account the fact that virtual meetings will likely extend the deal cycle.”
How to time your Series A fundraise
The reality is that founders fundraise in all times of the year. However, there are certain times of the year when investors are more actively reviewing pitch decks.
Q2 2020 Global Venture Report: Funding Through The Pandemic
Despite the turmoil of an ongoing pandemic, global venture funding for the second quarter of 2020 was not as dire as we expected, but it was down from previous years. However, reported funding over a quarter is a somewhat lagging indicator.
Not all VC investors are being slowed down by the pandemic
Among the top 20 most active US VC firms with assets under management of $500 million or more, just five have recorded more deals in the first half of this year than in the same period last year, according to PitchBook data.