Business·4 mins·21/04/20

Are investors still… investing?

Our CEO Ismail asked 500 investors. Here's what they said.

For start-up founders, the spread of coronavirus has created a unique concern. For companies that recently raised - congratulations 🙌 . Hopefully you've raised enough to be (a little) comfortable. For those that were planning to raise in the near future, it's scary.

Every two months or so, I share updates on how things are going at Scoodle to around 500 investors and advisors. In those updates, I tend to include an ask or two. In March, I asked the following:

Are investors still investing at seed and Series A given how uncertain things are? It would be really helpful for us to keep in mind.

Below, I've summarised their replies. Hopefully, this is helpful to founders in the start-up community. I've got a separate document that has their unedited and anonymised replies. If founders or investors would like to read this, just email me on

Investors are prioritising their existing portfolios right now.

This is both in advice and additional capital, but most importantly, in time.

"A lot of VC funds remain open for business, but their portfolio companies will be given priority during this challenging period."

That means funds have less time to meet new start-ups. If you're looking to fundraise now, a good starting place would be investors you've already built relationships with. If you're not raising right now, keep those relationships warm.

Remote businesses have an advantage (especially in health and edtech, which is great for Scoodle!).

The graph below illustrates this best. PWC's Raise team asked 84 VCs which sectors are most likely to benefit. Here are the responses:

Investments during COVID-19

It makes sense for some start-ups to actually accelerate their fundraising efforts! Here are a few quotes directly from the investor emails:

Fund, Pre-seed - Series B, $50k - $2m+, Saudi Arabia

"We've seen a jump in numbers for edtech, especially in countries that took online learning to schools and universities as a measure of controlling the spread of the coronavirus."

Of course, the outlook on some sectors (and stages) isn't as great:

"Late-stage investment will take a hit.

Capital intensive businesses will suffer because they don't have a guarantee of future funding (e.g. B2C businesses). In 2008-09, a lot of social networks died for this reason.

People do not know if you can get funding in two to four years, so will hesitate to fund you now."

It can be scary to think of raising money now. If you're in a sector that is heavily hit by Covid-19, you should do everything you can to make your cash last longer. If, however, you're growing because of all this, it may not be the craziest idea to consider raising some extra cash.

The uncertainty could last anywhere between three and 18 months.

A start-up would be smart to ensure they can exist for at least 18 months. That covers the worst-case scenarios of a recession and its recovery. To do this, you can raise more, generate more revenue or spend less - or ideally, a combination of the three.

Eighteen months is a worst-case scenario. Here are what some investors have said:

Fund, seed, £500k - £1m ticket, UK

"Regarding the investment landscape, I predict funding will slow down for the next 12 months. Therefore, I am encouraging companies to cut expenses where possible."

Fund, seed, £500k - £1m ticket, UK "The impact on funding will likely be substantial and negative. We were already in a very late-cycle environment, and this crisis quite probably is the catalyst that brings that cycle to an end. We are seeing early signs of investors pulling back/delaying rounds/conserving cash to support the existing portfolio. Having said that, there is current demand from some firms for companies that can prove they are resilient in this environment.

For fundraising, it's very tricky. Many VCs are in damage control mode, and are quite pessimistic on the scene for the next nine to 12 months."

Good founders and investors will always avoid over-optimising for valuation. This is true now more than ever. There are estimates that valuations will drop:

Valuations during COVID-19

For founders, priority number one is to exist. You can't build a billion-dollar company if you're dead.

Deals will take longer.

Many funds aren't used to doing due diligence entirely online, especially at seed stage. The emphasis is always on the founders. To what extent can you really invest in someone without meeting them? It's definitely possible. Some of our existing investors, pre-Covid, have done exactly that.

But for a lot of funds, this a steep learning curve. They'll spend more time getting to know you.

Also, they'll do this because they can. The demand for investment will shoot up, but its availability will come crashing down. This gives more leverage to investors. It means they can spend more time, with higher expectations at lower valuations, before making an investment decision.

Angel, pre-seed - seed, £25k ticket, UK

"Rounds are likely to take longer, investors will be more cautious and there could be weaker pricing. People will be wary of meeting up in person and that creates an additional due diligence risk.

Companies that need a round to keep growing (rather than for growth) will be better off going to existing investors and seeking less until things improve."

These insights would not have been possible without the tremendous introductions and support we've received from the ex-Google network and the Oxford Foundry. Once again, thank you!