Pre-IPO Profits

Startup Deal Flow Changing

Startup Deal Flow Changing
By Adam Sharp
Date May 12, 2020

One of my favorite AngelList syndicate leaders recently wrote a note to all the members of his syndicate. He told us the volume of new deals he’s seeing is down about 90%.

Many of the startup deals we’re seeing right now were arranged before the COVID-19 quarantines started. These deals often take three months or longer to come together.

So far, I’ve invested in three deals since the quarantines began. I can’t share the specific details due to confidentiality rules. But they’re a mixed bag in terms of the types of startups I chose.

One startup focuses on what I consider work-from-home technology. Every startup investor on the planet wants better exposure to this area right now. But you need to be cautious as you evaluate work-from-home tech startups. So make sure the deals are solid before you invest. Just because work from home is a hot sector doesn’t mean every deal will have positive results.

Another deal I invested in is a direct-to-consumer (DTC) product company. It’s a good time to invest in solid DTC plays. We’re in an absolutely brutal environment for retail stores. Everyone is hurriedly putting together their “Amazon-esque” strategy. And I’m watching this space closely as that trend continues

The last deal I invested in is a food delivery startup. Obviously, this sector has never been hotter. But until now, I’ve stayed away from it. Food delivery is a very tough business with low (and often negative) profit margins. However, this was a special case (in a good way). And I think that there are a few gems in this area to be found.

Eventually this quarantine situation will change. The questions we should be asking are — how much will behavior go back to “normal”? And has COVID-19 simply accelerated trends that were already happening?

I think, to some degree, COVID-19 has shined a spotlight on certain trends that are going to be the “new normal” going forward.

Work from home, food delivery, and DTC are all trends I want to be a part of even if the lockdowns end soon. And that plays into my general strategy right now of only investing in startups that I would want to own once things go back to normal.

And there are some trends, especially work from home, that I believe will outlast the lockdowns.

Top Posts on Early Investing