When the pandemic hit the U.S., the early-stage investing community essentially seized up, says Dan Roselli, founder of CFV Ventures, and co-founder of RevTechLabs Healthtech, Queen City Inurtech, Queen City FinTech and RevTech Labs. All the venture capital people were very focused on their existing portfolios, supporting their existing founders rather than entertaining pitches from entrepreneurs who were yet to be funded.
But once the summer rolled around, he says there was a change — a realization across businesses that they should expect the current conditions to be the new normal for the foreseeable future.
“That may be a little long, but I’d rather be prepared mentally for that to be the case and then be pleasantly surprised things are returning more to normal earlier than that,” Roselli says. “And because of that, what I think has happened is people have realized they have to conduct business. They have to find a way to get the train back on the tracks before the rest of life returns to normal.”
Roselli says all the VC investors he’s talked to have since done a deal where they have not met the founder in person. That’s something that would have been unthinkable prior to the pandemic.
“But we, just like everyone else have capital that we have to find good uses for, have to deploy, and get the return that our LPs are expecting,” he says. “Everyone has changed their mind on the venture side now to, Let’s hunker down and figure out how to make this happen. And I think that has happened.”
Another factor affecting the VC pipeline is that many entrepreneurs were concerned about the effect on their valuations if they went to market early during the pandemic and tried to raise funding. But Roselli sees that ice not just thawing, but there’s confidence from entrepreneurs that they can pursue the same valuations they had pre-COVID and VC are likely to accept it.
Roselli spoke on the Smart Business Dealmakers Podcast about whether the early-stage investments fundamentals have been altered by COVID, the eagerness (or timidity) of capital, and the sectors with early-stage businesses that are attracting the most investor interest. Hit play to hear the full interview.
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