The continued spread of COVID-19 is certainly expected to have an impact on the growth of the city's tech scene. The full scope, however, is impossible to predict.
The number of cases nationwide has yet to reach its peak, which means investors have been, and will continue to be, conservative about new ventures, said Brandon Shelton, managing partner of TFX Capital Management in Charlotte.
"The volume of uncertainty around personal health, the U.S. economy and the inevitable recovery, has frozen the investment community in general," Shelton said. "Some are finishing up investments that were in the works pre-COVID; most are focusing all of their attention on runway extension planning and scenario planning with their current portfolio companies."
Overall, Shelton said, investors will take care of their current portfolio before looking at new investments.
A report published recently by PitchBook, a Seattle-based financial data and software company, noted Q1 deals are expected to be largely unaffected, but total venture transaction is likely to decline over the next few quarters.
"The volume of uncertainty around personal health, the U.S. economy and the inevitable recovery, has frozen the investment community in general."
Shelton said it's nearly impossible to predict long-term impacts to the Charlotte-area startup scene, but it will probably mirror similar markets around the country.
"A sharp recession will trigger high unemployment, loss of individual wealth, and a lack of investment risk appetite, regardless of where you live," he said.
He said all small- and medium-sized businesses, as well as startups, should evaluate the business lending programs coming out of the CARES Act.
"Not everyone will qualify, but it might be a good way to survive near term," he said.
Potential Growth and Recovery Amid Unfamiliar Circumstances
The uncertainty surrounding the ability to raise funding may seem bleak right now, but Sam Teden, an investor at Anthos Capital in Charlotte, said it is still possible for startups to grow.
"Obviously, it all depends on the business and how they're performing," he said. "If they're a high-performing asset, then funds would love to put capital to work."
Teden and Shelton both said they believe investors will begin looking at startups that will prove useful during the current public health crisis and beyond.
"This crisis will usher is a completely new 'normal' across a number of fronts - telehealth, remote working and communications, bioscience, e-learning, digital health, situational awareness and safety tools, etc.," Shelton said. "So if a startup finds itself going on offense then it needs to find investors to support that ambition."
However, even some of the hardest hit businesses, most of which are in the retail and restaurant industry, could rebound under the right circumstances, according to Teden.
"If they can make it through this and continue to find ways to grow, then investors will have a lot of conviction around the business being resilient during a downturn," he said.
Shelton believes recovery time, for investors and startups alike, will depend upon several factors.
"It depends on how you define 'recover,'" he said. "I think it will take our U.S. economy, thus, the average startup, angel group, venture capitalist, two to five years to fully rebound from the full effects of the current environment."
