VC Financing Trends: The Current Fundraising Climate for Startups

Fenwick startup & venture capital practice co-chair Cynthia Clarfield Hess talked to The Wall Street Journal about the current venture capital investing environment as well as takeaways from Silicon Valley venture financings in the second quarter of 2020.

Hess, who co-authors Fenwick’s Silicon Valley Venture Capital Survey and Venture Capital Flash Report, explained how the firm’s latest survey found an increased percentage of flat rounds over the last quarter, suggesting startups are doing more inside rounds led by existing investors.

“Investors still believe in the fundamentals of the company but believe it’s not the best time to raise funding now. They don’t necessarily want to do a down round. They prefer to do a flat round,” she noted.

Hess told the Wall Street Journal that valuation results declined over the last quarter. She explained that this makes it tougher for newer startups with first-time founders to get funded.

“For first-time founders, I think this is a much harder market to get funding, recruit and launch a company,” Hess explained, while pointing out that companies that survive the pandemic could emerge stronger in the long term.

“The work companies did when the pandemic hit to get their houses in order will pay dividends in the future,” Hess said. “Companies are learning to operate differently, without expensive marketing programs and conferences. These sorts of changes could benefit companies’ profitability and the way they do business over time.”

The full article is available on The Wall Street Journal (subscription required).