When the pandemic started, the conventional wisdom was that the capital markets would take a beating, including the venture capital market for startup capital.
The second quarter of 2020 is now behind us and we will see the data on it soon. I suspect what we will see is a very active venture capital market, quite the opposite of what was initially expected.
There are a number of reasons that I think we will see that.
First, venture capital firms raise funds and it is our job to put them to work. If we see interesting opportunities, it is our job to invest in them. We are not paid to hoard the cash.
Second, the stock market for tech companies has been on a tear in the last three months and that weighs on the minds of investors. A bullish stock market leads to a bullish venture capital market.
Third, the pandemic showed that software based businesses, e-commerce, software infrastructure, and other sectors popular in startups and venture capital are resilient and attractive right now.
Fourth, sitting at home all day, not being able to travel, not being able to socialize, creates an efficient work environment for many (but certainly not all).
And finally, there are so many great founders out there coming up with excellent business ideas. The pandemic has not slowed that down. If anything, it has sped it up.
It is possible that some sectors of the venture capital market have slowed. Some areas which have attracted big growth investments over the last few years were quite negatively impacted by the pandemic and I would imagine we will see parts of the growth market negatively impacted as a result.
But looking back on the second quarter of 2020, what I see is a hyperactive venture capital market firing on all cylinders. And that is good news for founders and innovation.