- COVID-19 hasn’t slowed seed investors in New York.
- Changes in behavior triggered by the pandemic are an opportunity for telehealth, work-from-home startups with ideas that meet these new challenges.
- While it’s too early to predict the long-term impact of the coronavirus on the economy and behaviors, seed investors remain bullish about the prospects of New York.
COVID-19 might be slowing most sectors of the economy but it’s still a good time for early-stage startups in New York. At least that’s what some of the top seed funders in the city think.
Venture capital firms that focused on Series A funding before the pandemic are now joining seed investors in backing early startups, some of New York’s top seed investors said in a virtual panel hosted by Eniac Ventures. The coronavirus outbreak has led to behavioral changes and founders with ideas that deal with these new challenges have the opportunity to quickly scale up their startups, according to Graham Brown, a partner at Lerer Hippeau.
“I think the amount of firms participating at seed is actually growing,” Micah Rosenbloom, a partner at Founder Collective, said. “I think in some ways that everybody feels more comfortable in an uncertain environment writing a smaller check.”
Seed investors invest capital in a startup company in exchange for a stake in the firm. The check size during this stage can rise to the $4 million-to-$5 million range and start as low as $500,000 during the pre-seed stage, according to Melody Koh, a partner at NextView Ventures. The seed investors were in agreement that a startup’s runway — the amount of time they need before they run out of cash — will now be longer than traditional expectations of 18-to-24 months.
“Seed is as active as I remember it,” Rosenbloom said. “I think it’s as busy as it was pre-COVID, if not busier.”
Founders during this period are also benefiting from the availability of talent. Layoffs at companies such as Airbnb, Uber and Lyft have increased the size of the talent pool, while reducing the cost of taking on these skilled employees. “I think this is the best time to start a company,” said Hadley Harris, a co-founder of Eniac Ventures. “When we look back, the companies that start in the next year are going to do very well.”
Seed investors, like all sectors, are adjusting to the realities of doing business during a pandemic. Most panel members have invested in a founder they haven’t met in person. Improvements in technology give investors the ability to make deals remotely, but it’s no substitute for meeting in person, according to all the participants, and they expect to rely on virtual meeting technology through the summer and into the fall.
Founders with ideas in telemedicine and technology that allows for remote work should find willing investors, and could see their products hit the market much faster than would have previously been the case, panel members said.
“You have behavior change and opportunities that are accelerated,” Brown said. “Digital health is going to continue to have a moment. We’ve been moving towards telemedicine for the last 10 years, this has clearly accelerated it.”
New York’s economy has been devastated by COVID, as the state undertook drastic measures to curb the nation’s highest death toll. Governor Andrew Cuomo warned on Tuesday that he didn’t believe the state’s economy would “just bounce back.” While the media is full of stories casting doubt about New York’s economic prospects, the seed investors on the panel remain bullish about the long-term prospects of both the city and surrounding region.
“New York is not going away, some folks might leave town but that’s going to help with rents,” said Shai Goldman, managing director at Silicon Valley Bank. “If you want to build a distributed team you can have talented engineers outside of New York which is beneficial for some New York companies. So, I’m still bullish on what’s happening here.”
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