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Coronavirus may Freeze Fund Flow into startups as VCs Exercise Caution

Across the globe, the spread of coronavirus has turned on its end on the established sequence of things. States and cities are locked down, industries are grappling, and people are quarantined under the uncertain crisis. 

The area of investments are also trying and coping with the COVID-19 uncertainty. 

Moreover It may seem like early days, but anxiety is tangible among venture capitalists (VCs), entrepreneurs, and startups over what the coming future might bring, after coronavirus.

Pranjal Kumar, CFO Bertelsmann India Investments, stated that, (COVID-19) Corona started to hit in mid-February. So, there is uncertainty and no one knows what is going to be the outcome.

This situation was amplified globally when marquee venture capitalist sequoia put out on how COVID-19 would effect the ecosystem. 

In a memo to founders and CEOs, Sequoia equated coronavirus with the “black swan of 2020”, stating it could have far-reaching losses. And also its guideline to startups was simple: question every assumption, be it the business, cash runaway, fund raising, sales forecast, marketing, headcount, capital funding, and the list goes on.

V Balakrishnan, Chairman, Exfinity Ventures, a PE and VC fund, claimed that currently there is not any big change available for most of the investors. However that being said they have to see how things and activities will turn out in the coming weeks and months. All the people round the globe are baffled and have no idea as to what will happen in the future.

Moving ahead The world of investments is interconnected as funds and capitals that run startups come from various sources.

The sources for example include the stock market, real estate, savings, or profits generated by companies.

Siddarth Pai, Founding Partner of VC firm 3ome4 capital says that The focal source of funds for investors is the stock market. When that goes down, it has a messed up effect on investments into unlisted entities.

Ganesh Rengaswamy, Co-founding Partner, Quona Capital, Ganesh rengaswamy says, “The sentiment is cautious but positive for investments in early-stage startups. Also Adversity could present opportunities, too. The situation is evolving and changing.”

The uncertainty that comes with the crisis is the big challenge that we have to deal with.

-Authored by Farheen Malik (Content Developer, Startup-Monk)

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CIN- U74999DL2019PTC347107