Covid brought a lot of uncertainty to financial markets which brings up concerns about how it might impact the state of VC and startup fundraising. There were a lot of initial concerns about what the effect of Covid might be on VC.  Issues people were worried about were the lack of availability for in-person networking for founders and VC’s, lower consumer spending, and reduced ability for consumers to experience new products. Although all of these concerns are fair and valid, Covid opened up more doors than it closed in the realm of VC and entrepreneurship.

Covid increased the importance of operational efficiency for companies which opened up opportunities for startups that were developing software that helps with automation and improved efficiency for firms. The need for online video chatting and virtual entertainment has also increased which opens up a new market space for startup growth. Gaming platforms, at-home fitness, food delivery, telemedicine, and mental health platforms have all gained huge amounts of traction amid the pandemic.

Since Covid started, there has also been an increase in the number of startups. Some experts believe that this is due to people having to find alternative sources of income as a result of losing their job due to covid. However, even though there are more startups in the space there has been a slight dip in the number of deals VC’s have been making. The uncertainty related to the market as well as the increase in options to choose from has made VC’s more cautious when it comes to investing. The virtual world takes away geographical barriers to finding startups as well and allows for more time to find good startups as well allowing VC’s to have more options. There’s also been a trend to promote more racial and gender diversity within the VC and startup industry. With the widespread protests related to George Floyd’s death in the summer and the discussions that emerged from it, many VCs have become bigger advocates for diversity and support diversity-founded startups.

The rapidly changing circumstances, work conditions, and lifestyles in the world we live in require new solutions and technology. In order for startups and VC’s to succeed in this reality, they need to be able to adapt to the changing circumstances and take advantage of the new opportunities it creates.

Author: Harika Thota | LinkedIn