The Ways Venture Funding Will Change in 2020

Fenwick’s startup & venture capital practice co-chair Cindy Hess talked to Marker about how the COVID-19 pandemic is changing the venture capital market.

Hess, who co-authors Fenwick’s Silicon Valley Venture Capital Flash Report and quarterly VC survey, explained there has been a steady decline in financings through the first quarter of 2020 and that it will likely be more difficult to raise early-stage funding.

“I’d predict that VCs are going to focus more heavily on existing investments to make sure they’re taken care of,” she said.

Hess noted valuation results declined over the course of Q1 2020 and that she is seeing more favorable terms for VCs being built into financing deals. “We’re already seeing a resurgence of terms we saw in prior downturns,” Hess said.

She told Marker that pay-to-play provisions and full-ratchet provisions are starting to become more prevalent.

​​“Investors don’t know in full how the pandemic is going to affect companies,” Hess said. “They don’t want to put money in at too high a valuation.”

The full article is available on the Marker website​.​