A surprising number of both founders and VCs are taking the (possibly apocryphal) advice of Winston Churchill to “never let a good crisis go to waste.” In their recent weekly VC and entrepreneur sentiment surveys, Chausson Finance has produced some timely insights into how investors and founders are behaving and a weekly sentiment gauge.
A full two thirds of European founders are seeing the crisis as an opportunity, with a whopping peak of 85% of founders surveyed in the UK saying the adoption of digital tools is a driver for their business. A surprising 44% are also still growth focused, with the rest pulling back into cash preservation mode. A healthy 42% of the companies say they may take advantage of state support when it comes to subsequent funding but a majority still think they can rely upon VC backers to fill the coffers
While founders are optimistic about opportunity and financing potential they still face headwinds as investors slow their pace of investments. The survey shows while investors are generally optimistic their capacity for deals is slowed by the inability to travel and meet founders in person.
A striking percentage of European VCs, 70%, think the recovery will follow a ‘U’ shaped curve but still has yet to bottom out. This means only half of funds really are operating at their usual capacity, as many still do have fires to fight among existing portfolio companies and are otherwise slowing their new investment pace assuming a market bottom is still yet to come. Further, given that at least one-third of investors say they are not comfortable making investments remotely, the other two-thirds are likely to limit their investments mainly to founders they’ve previously known or previously worked with in earlier investments.
Founders, especially those without existing venture financing or previous relationships, will see some of their optimism dampened when it comes time for them to seek that financing. First time founders especially will struggle to build these relationships when they can only do Zoom meetings for the indefinite future. The consensus amongst surveyed investors was that it would be 14-19 months until business was “back to usual” so founders should heavily consider that timing in their own fundraising plans. Even when isolation restrictions are lifted many VCs will still choose to limit their time in the office and prefer virtual meetings, so it could be a substantial wait before these founder relationships can be fully developed enough to drive investment decisions.