The past decade has seen a momentous rise in deal activity between startups and venture capital investors. Total VC investments hit $136 billion at the end of 2019 and was already up to $34 billion by the end of this year’s first quarter.
However, the onset of COVID-19 has slowed investments down significantly during Q2. The fact of the matter is that quarantine and national lockdowns prevented many founders and VCs from meeting up face-to-face… And fewer meetings means fewer investments.
It takes time to adapt to new circumstances – which is why things were a bit sluggish in the startup world for a while there. But that’s about to change.
Because as parts of the due diligence process have been forced online, more companies, founders, and investors now have the opportunity to access high-capital opportunities that have traditionally been reserved for a very elite few.
I don’t think that remote due diligence is going away anytime soon… and I’m betting that more companies and investors will see its value and effectiveness long after this crisis subsides.
Here are two trends in particular that I see sticking around for a very long time.
Quicker investment turn-around times
Traditionally, much of the one-on-one due diligence process between an investor and an entrepreneur takes place in person… and this process can take some serious time.
In fact, the Financial Times reports that investors typically spend around two weeks meeting with a startup’s team in person just to understand their business model. And that doesn’t take into account the money and time put into traveling out to wherever that company is located.
But investors and entrepreneurs have now been forced to move this process completely online – and it’s sped things up tremendously… By a whopping 25 percent on average. That gives investors more time to shuffle through a larger number and wider variety of startups than ever before.
That doesn’t necessarily mean that investors are funding more companies than before. In fact, quicker turnaround times for due diligence processes means that investors have the ability to turn down a company faster than ever before, too.
But what’s great about this trend is that without the travel time and money loss of traditional due diligence, more companies now have the opportunity to try their luck at winning over investors from around the world.
While I’m not doubting the value of an in-person meeting between investors and founders, I think that people will increasingly see the effectiveness and value of these remote processes… and I doubt we’ll see that trend go away anytime soon.
Expansion beyond Silicon Valley
Startup and technology hubs like Silicon Valley are famous for housing some of the world’s most prolific businesses, entrepreneurs, and investors.
Silicon Valley alone is the home base for behemoth corporations like Apple, eBay, Google, and Intel… just to name a few. In fact, Silicon Valley is home to so much wealth – around $128,000 per capita in annual GDP – that if it were its own country, it would be one of the richest on the planet.
Places like these attract entrepreneurs – and investors looking to make big bucks – because they’ve got massive talent pools, business resources, and insane networking opportunities that are magnets for aspiring founders.
Now, I don’t expect Silicon Valley to disappear from the public eye anytime soon. It’s saturated with too much opportunity to ever become irrelevant.
But not every fledgling company can afford to move to a city with some of the highest costs on the planet. And other companies, to put it bluntly, shouldn’t. For example, why should a startup developing a new agricultural tool have to leave the Midwest just to get in front of an investor?
The good news is that I expect the global investment landscape to shift in favor of entrepreneurs and investors who can’t or shouldn’t live in these hubs… because with remote capabilities comes the ability to take due diligence anywhere.
And increasingly remote due diligence processes could create massive opportunities for entrepreneurs and investors everywhere, helping founders network and build capital for their companies, whether they’re located in Silicon Valley or halfway across the world.
This should all come as great news to you… because if you’re a part of our Network, you’ve already seen the value that comes from diverse and global collaboration.
Because here, you don’t have to be a Silicon Valley hotshot to have a chance at scoring major returns. Our community spans from California all the way to Italy, and everywhere in between… and everyone who is a part of this movement has an equal opportunity to get in on the ground floor of some of the most incredible up and coming companies I’ve ever seen.
I’m excited to keep this community growing with you.
Until next time,