As many of you readers know, we track fundraising market activity on a weekly basis with our Pitch Deck Interest metrics. In today’s newsletter, we wanted to dig deeper into data we collected over Q3 and share our predictions for Q4 into 2021.
Q3 Pitch Deck Interest Metrics Review
Key Leading Indicators of VC Fundraising Activity
The Pitch Deck Interest metrics are part of the DocSend Startup Index and measure activity via three key indicators of founder and 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. The Pitch Deck Interest metrics are a leading indicator of future deal flow and fundings.
After a record summer, the market is due for a correction and possible volatility
“We saw an abnormally active summer for the fundraising marketplace,” said Russ Heddleston, co-founder and CEO of DocSend. (tweet this) “After an abrupt halt to fundraising in March, founders were eager to get their decks in the hands of VCs during a time when we usually see a seasonal slowdown in interest and engagement. However, data from September is showing signs of a possible market correction.”
While week 37 (Sept. 9-15) usually kicks off the fall rush, VC interest was down 6%. For comparison, in 2019 VC interest was up 16.7% and in 2018 the jump between week 36 and week 38 was 22.3%.
“While interest rebounded in the last two weeks of the quarter, it hasn’t yet reached back up to the Q3 average. This leads us to believe that VCs’ interest will slowly decline for the rest of the season, and we won’t see a typical fall rush as in previous years,” Heddleston added.
Founder Links Created
Founders are following a similar trend. While the number of links created by founders stays far more steady throughout the year, the last six weeks of the quarter showed steady or declining numbers for founder links created.
Links to pitch decks created by startup founders — indicating the supply of potential investments — also saw a spike in Q3 compared to previous years, with 18.8% more links created per pitch deck than in Q3 2019 and 51.3% more than in Q3 2018.
“This is the longest stretch of slow or declining activity from founders since February and March. While the decline earlier this year resulted in a post-pandemic spike, an end of year spike from founders is unlikely,” Heddleston continued.
Investor Time Spent Reading
The highest week of VC interest in the quarter was August 17 to 23, a time of year that is seasonally slower for VC activity. Data from this same week also showed the least amount of time spent on decks; investors never spent more than three minutes on average on a deck during Q3 and overall averaged 2:51 minutes. Investors are increasingly efficient in their pitch deck reviews: time spent on pitch decks was 18.3% lower than in Q3 2019 and 21.2% lower than in Q3 2018.
Our Predictions – Expect to see a spike of activity in Q2 2021
With an election on the immediate horizon, we can expect to see some volatility in the fundraising marketplace in November and early December regardless of the outcome of the election. In 2016, in the three weeks following the election, there was a decline in both VC interest (33.7%) as well as founder links created (22.3%). But starting the week of November 28, both rebounded over the next three weeks.
“Coming into 2021, brace yourself for a superstorm of activity, especially in Q2 of 2021. Often there is a surge of new businesses starting amid an economic downturn, so many of those companies that started during the pandemic will be entering the pre-seed stage in Q2 of next year,” said Heddleston. “We are expecting a substantial uptick in activity after what is usually a quiet Q1 while businesses navigate a post-election market and economic landscape.”
We will continue releasing quarterly reports via the 2020 DocSend Startup Index to track the investment landscape and better inform startup founders as the business and venture capital environment continues to change.
Mastering Your First Term Sheet: Founder and Attorney Perspectives
This Q&A interview with Russ Heddleston and Aaron Terwey, Counsel at Atrium, gives you a peek into the real-world insights they shared and how founders can avoid some of the common term sheet minefields throughout the fundraising process.
Drive Growth by Picking the Right Lane — A Customer Acquisition Playbook for Consumer Startups
Dan Hockenmaier and Lenny Rachitsky share their framework for “picking your lane”, walk you through three case studies of companies that became world-class at a lane, and then tackle some frequently asked questions about consumer startups.
Are you raising your pre-Seed or Seed round?
Founders, join the DocSend Fundraising Network for complimentary, data-driven pitch deck analysis and warm intros to VC, based on our quality bar and matching criteria. Lead early-stage VCs can apply to receive intros to startups in the program.