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In this post, I share my thoughts on how my investing behavior has changed since the outbreak of the Corona crisis. Which factors do I pay more attention to as an investor? How can you continue to be successful in startups despite Corona? Seedrs invest? What opportunities might Corona present?

Liquidity/runway of startups

Due to the Corona crisis, at least part of the sales are missing in many industries or they have even temporarily failed to materialize. The fixed costs of startups can be partially optimized and reduced. This has been the central theme of many startup updates in recent weeks. Startups report successful cuts of between 15-50% in their costs, which make the company healthier and ensure that existing cash lasts longer - and ideally the company survives or even emerges stronger from the crisis.

Investors are also becoming increasingly cautious with their own investments. On the one hand, Corona hits some crowd investors hard themselves, for example when their own jobs are in danger or short-time work and corresponding wage cuts have to be accepted. This has a negative impact on the opportunities for startups to receive follow-up investments.

One of the central and most important points is how long the startup can survive before new capital is urgently needed. Or the question is how long the start-up's new investment round will be sufficient to emerge from the crisis on a solid footing and without the risk of insolvency.

Tip: Pay attention to the cash runway of your startups and only invest if you assume that the new round size will be sufficient to survive the crisis or if you assume that the startup will easily receive further financing.

Negatively affected industries

• Travel/ Travel, Hospitality
• events
• Food/ Dining, Restaurant
• Physical shops/ retail premises
• Financial startups with rather high risk for investors

Industries as winners of the Corona crisis

• Digital business models
• Online shops/ companies with a high proportion of online sales

Attractive (crisis) startup valuation

Presumably there will be a lot of follow-up financing in the coming months Seedrs give. So many that you can't invest everywhere. Basically, I only support follow-up rounds if I am satisfied with the startup communication in the past and am still convinced of the success of the startup overall. If that's the case, then I prefer companies that take the increased risks from the crisis seriously and give me as an investor a good company valuation that is not overpriced. Also read my post on this company valuation. If I believe that risks have increased and there has been no undervaluation in the past, then I expect that a startup may also reduce the last valuation in order to collect sufficient capital and thus ensure its continued existence.

"UK Future Fund" as an additional financing option

Fortunately, the UK government recently announced the so-called "UK Future Fund", through which start-ups can receive state aid. Here is the original article from Seedrs-Founder Jeff Lynn for UK Future Fund. The exact details of how UK startups can get this help are not yet clear. However, the key points are that the startup must have raised at least £250k from investors in the last 5 years and that the new investment round will be structured as a convertible (convertible loan), in which the state will add the same amount that the startup in this convertible Round was collected from investors. Convertibles, on the other hand, have their own pitfalls. Therefore, read the Convertible Terms carefully before investing in a convertible loan. With convertibles, you are usually already investing money in a startup, whereby the exact company valuation will only be determined in the next round of financing and usually a rebate (discount) will be given to convertible owners on this still uncertain next round. There are additional boundary conditions as to what and at what valuation you will receive your shares if the follow-up financing is not carried out within the time as described in the convertible.