Hey, I'm Dan! I invest in startups at Madrona and write the DL, a weekly newsletter about tech in the Pacific Northwest

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COVID-19's Impact on Seed Investing

The chart above shows the number of seed deals per month for the last decade. In 2020, seed rounds have plummeted to levels we haven’t seen since 2013. For the last three years, there have been 2,000 to 2,500 seed deals by the end of March, but this year there have only been 1,200.

Interestingly, there is typically a spike in deals every January, and this year we did not see that spike, perhaps indicating a slowdown in the Chinese startup market and/or VCs paying early attention to the spread of COVID-19 before it had reached Europe and North America.

Taking a closer look at a cohort view of the number of deals, right now it looks like we are on track to have a year like 2014, when VCs invested in 2,400 seed deals. Compared to 2019, that would be a ~50% year over year decline.

Of course, even with a significant decline in deal volume, VCs are still looking for new investments (and bragging about it), and startups are still getting started. As Paul Graham recently tweeted

“Any startup that gets started during the next few months is disproportionately likely to succeed. Success depends most of all on determination, and imagine how determined you have to be to start a startup in the middle of a global pandemic.”

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