The Coronavirus has taken an historic 10 year bull market and turned it into a bear market.
With comparisons to 9/11, the 2008 financial meltdown, and the Great Depression, startups and investors are adjusting to a new way of living.
In the short term, the investors will look for a gyrating market to settle out. This will take several weeks; maybe months.
After investors adjust to their new found portfolio status, they will re-engage investing in startups.
Some investors will look at this as a great buying opportunity and will move into the market more quickly.
Others will move away from the public markets, fed up with the frantic nature of public sentiment. They will look for private companies with solid growth prospects.
Based on previous downturns, early stage startups (Seed and Series A) will see the same level of deal-flow activity.
Later stage startups (Series B and beyond) will see reduced investments as their higher level dollar raises will be difficult to support in a tightening market.
Valuations will also come down. Investors who lost x% in the stock market will be looking for an equivalent haircut in valuations by startups.
Startups on the West Coast and East Coast, having over inflated valuations, will see the greatest drop. Those in the Midwest will see a small to moderate drop.
Startups will find that it takes longer to close sales (especially high dollar products) as customers will take longer to make decisions and be slower to sign up.
This will make it harder for the startup to tell the growth story to investors who will be increasingly looking for ‘sure thing’ investments.