Q&A: What the pandemic downturn means for startups

Many types of companies are getting hit by the pandemic-caused economic downturn. Tom Wallace talks about what it means for startups and early stage companies from the perspective of beingĀ  managing partner at Florida Funders. Ā His company is a hybrid of a venture capital fund and online investing platform that invests in early-stage technology companies in Florida. The firm is led by an experienced team of serial entrepreneurs, venture capitalists andĀ  angel investors with track records of successful exits and a shared passion for growing the next generation of Florida tech companies.

Tom Wallace is managing partner at Florida Funders

What this risk of recession means for funding for startups?

I fully expect that funding for early stage tech companies is going to be a more challenging environment for at least the next quarter or two and could last up to a year or longer. Angel/early stage tech investors are all seeing a significant hit to their equity portfolio and I believe this will bleed over and have an impact on the amount of funds that they allocate for early stage tech investments.Ā  I don’t see funding for startups drying up completelyā€”I think there will be less capital to go around and therefore it will be a more competitive landscape and that overall fewer deals will get funded.

What does volatility mean for those seed/early stage investors that startups rely on?Ā Ā 

Volatility is never a good thing for investors. Just like in the public equity markets when there is a significant amount of uncertainty, investors tend to get skittish and are not compelled to do anything, including making new investments until things get back to some level of normalcy. Having said this for investors who are willing to be bold, as we plan to be at Florida Funders, then valuations should be lower (i.e. better for investors) and there should be less competition for the best and most exciting early stage investment opportunities.

Will investors hold back on investment to be safe?Ā Ā 

I am sure that some investors will, but again we see this challenging environment as one that can be very beneficial to the investor who is “in it for the long run” and is willing to take risks on strong founders with good business models/solutions.

For more information on Florida Funders, please visit www.floridafunders.com. Keep up with the latest news from Florida Funders on Facebook, Twitter, and LinkedIn.

 

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