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5 Ways Venture Funding Will Radically Change In This New World
Startups need to brace for fewer seed rounds, harsher terms and more earthly valuations
“My mom used to tell me, ‘I think you were born with a horseshoe up your ass,’” says Eric Rea.
He has reason to feel lucky. He’s CEO of Podium, a messaging platform for small businesses that’s based in Lehi, Utah, which at the end of March closed on a $125 million Series C round. It was one of the largest venture deals of a first quarter unlike any in memory — and not in a good way. Like most financing events consummated during the Covid-19 shutdown, Podium’s deal, which valued the fast-growing SaaS business at about $1.5 billion, had been negotiated well before any shelter-in-place orders were issued. But despite a significant change in macroeconomic conditions, Rea says, “we got the round done at the exact terms signed at the end of February.”
Thanks to getting a jump on the pandemic — and an existing relationship with returning investors, led by Y Combinator’s Continuity Fund — “we got lucky,” he says. “They would have had a legitimate rationale to say they changed their mind based on new evidence.” Other founders, he knows, are having a tougher time, facing not only Covid-discounted valuations, but the reemergence of some dicey deal terms…
