Despite coronavirus, startup funding not slowing down
Investors have put $41.1B to work in reported funding rounds of $10M and up through March 17
Despite the market volatility caused by the coronavirus, funding for startups has remained relatively unscathed, even though it has historically trended sharply lower during recessionary times like the dot com bubble of 2001 and the 2008 financial crisis.
According to a global analysis by Crunchbase on Wednesday, totals for venture funding rounds are down about 11 percent in 2020 year-over-year. Overall, investors have put $41.1 billion to work in reported rounds of $10 million and up through March 17 of this year, compared to $46.2 billion in the same period in 2019.
While it's a slight decrease overall from last year, it is still too early to tell how the virus will impact startups as the majority of financings are reported weeks or months after the date they close. Funding cutbacks may be more easily seen in a startup's early stages or during smaller rounds when sought-after deals come together more quickly.
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Crunchbase found that the year's totals have mostly been boosted by transportation companies like Google parent Alphabet's autonomous vehicle startup Waymo, which reportedly had a funding round of $2.25 billion. The haul from funding rounds was also high for startups like plant-based meat producer Impossible Foods ($500 million), banking startup Revolut ($500 million) and data warehouse provider Snowflake ($479 million).
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While there are no immediate signs of a slowdown, venture firm Sequoia Capital warned last week that startups should be taking a more cautionary approach as the odds of a recession are more likely.
"Coronavirus is the black swan of 2020," the firm said in a memo to founders and CEOs of its portfolio companies. "With lives at risk, we hope that conditions improve as quickly as possible. In the interim, we should brace ourselves for turbulence and have a prepared mindset for the scenarios that may play out."
The company added that even if startups don’t see "any direct or immediate exposure" to sales forecasts, they should be prepared for customers to "revise their spending habits" due to the coronavirus.
"Deals that seemed certain may not close. The key is to not be caught flat-footed."