Survey Results: Midwest VC activity during COVID-19, revisited (November 2020)

Jonathan Ellis
8 min readDec 18, 2020

Back in April 2020 we checked the pulse and sentiment of the Midwest VC ecosystem when the COVID-19 pandemic was new and stay-at-home orders had only recently been introduced (see Midwest VC activity during the COVID-19 era).

Six months later, at the end of October, we thought it was time to check back in with Midwest-focused VCs to see where we are now and what’s ahead. We sent a survey to various VC firms, angel groups and family offices across the Midwest and received 101 responses. For context, these are mostly “early stage” perspectives, with 49% of respondents indicating they invest in Pre-Seed rounds, 88% Seed, 63% Series A and only 28% Series B or later. Below is a recap of what they shared.

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First, “How would you describe the current status of your firm?”

The vast majority (88%) of VC firms are reporting that they are operating “business as usual”, up dramatically from when we last surveyed VC firms in April, where roughly only a quarter of respondents indicated that they were conducting business as usual. Another 11% of respondents indicated that they were focused primarily on their current portfolio suggesting some ongoing stress. However, after the market froze up in April, activity is back to normal as VCs have adapted to current conditions.

Compared to pre-COVID-19, the vast majority of VC deal pipelines have stayed the same (40%) or increased (50%), with only few reporting a decrease in deal flow. The reduction in travel and in-person events has likely more than been offset with virtual sourcing and screening, reducing geographic barriers and increasing efficiency, at least at the top end of investor pipelines.

So, many VCs are back to hearing pitches — but how hard is it going to be to get a meeting? 38% of the recent respondents indicated that they are being “a little more selective” to “much more selective”, down from 64% in the April survey. This decrease can be partially attributed to a shift from heavy portfolio support, individuals finding routines around working from home, childcare, etc.

Working remotely has become the norm for many this year, and it’s no different with VC firms. Nearly all firms surveyed (96%) report working either fully or partially remote.

With many firms now working on a partially or fully remote basis, have investors closed transactions fully remotely? Nearly three quarters of respondents indicate that they have already completed a fully-remote basis since the pandemic, and another 19% indicating that they anticipate completing a fully remote transaction.

How has their investment criteria, screening and/or due diligence process changed since COVID-19, if at all?

While 25% of respondents reported that their investment criteria, screening and/or due diligence process have not changed at all since COVID-19, the most common change for investors is, unsurprisingly, a digital due diligence process. In some cases, this has led to a longer diligence period with several Zoom calls needed before feeling comfortable with a founder. In other cases, it has led to a need for additional reference checks outside of their typical process. 7% of respondents said they added a COVID-19 screening component to their process, in order to better understand the current climate’s impact on their business and how truly critical they are to their customers. Other common responses included a requirement for companies to have longer runways and faster revenue cycles, a higher bar or traction requirements, and a thematic focus change on select industries. Many firms are, in practice, incorporating more than one of these changes.

So what has this translated to in terms of the number of deals funded? The 100+ investors surveyed were also asked to report their initial investment expectations for 2020, revised 2020 projections, and expectations for 2021. On average, firms expect to make approximately 10% fewer investments this year than originally expected (a mean 6.5 investments per firm, down from an expected mean of 7.2). Data from Pitchbook and other sources may show lower activity in 2020 at this point due to unannounced deals. Looking forward to 2021, firms anticipate deal activity will increase meaningfully, up approximately 14% from 2020 revised projections.

Combined, the total number of new investments made by survey respondents in 2020 is projected to be 647 down from original expectations of 714 (a 9.4% decline). However, with multiple investors per round being typical, the total number of companies being funded is lower than this. The other interesting thing about this data is that it shows approximately 50–60% of Midwest VC investors invest in a new deal every 2–4 months on average, with the remainder operating at a higher velocity.

While deal volumes are expected to be slightly down for the year as a result of COVID-19, few VC firms (15%) report seeing valuations decrease. In fact, nearly half (47%) of all VC firms surveyed indicated that valuations were either “mostly up, down in some cases” or “up broadly”. In our April survey, the consensus was a 20–30% valuation decline, so what has happened? Anecdotally, the market has generally been separated into those with COVID headwinds and those with COVID tailwinds. Investors are holding off on investing in businesses that are facing challenges in terms of business model or momentum in current market conditions instead of investing at a lower valuation, and instead there’s more competition and demand for businesses that are demonstrating growth in spite of everything, resulting in healthy valuations for those that can get funded.

While COVID-19 has posed a continued health and safety risk for many, many VC’s have expressed concern around its impact on their portfolios and investment activities. Fortunately, many firms expressed a more optimistic view for the future. Note: this survey was conducted before the recent vaccine announcements, which adds further encouragement.

Expectations for market conditions during 2021, however, skew slightly bearish, with 42% of firms reporting their outlook is “very bearish” or “a little bearish”, compared to 30% reporting “very bullish” or “a little bullish”.

Respondents were also surveyed on their predictions for who would win the U.S. presidential election and the potential impact the election would have on their portfolio (this survey closed on on election day). While the majority (84%) of respondents predicted Joe Biden would win the election, respondents anticipated the results of the election would not make much difference on their outlook on portfolio and investment activity.

We asked respondents to share any quick advice you would like us to share with founders fundraising at this time? It boiled down to the following:

A few example comments:

  • Raise earlier (Seed/Series A can take 8 months+ to close) and raise for longer (20–24 months of runway minimum).
  • Be smart about cash burn rate and how aggressively you grow the company
  • Think “clearing price” not “valuation”
  • Raise as much as you can when you can, not when you need it
  • Raise soon; 2021 will be a year with lots of great companies competing for funds

Click here for the full list of advice from VCs

We also asked what their biggest day job-related concern is right now:

Since venture capital is at its core a relationship driven business, it is no surprise that 16% of respondents were most concerned with managing remote relationships during the pandemic. This included everything from picking the right founders to invest in while only meeting them virtually, to hiring a remote team, to managing relationships with other investors in order to support portfolio company raises. 14% of respondents were concerned about their own fundraises and LP management given the economic downturn, while others were concerned with struggling portfolio companies, ensuring proper deal flow, managing their time while working remotely and general uncertainty.

Finally: What’s the one thing they’d like to see (more of) in the Midwest ecosystem? We categorized the qualitative responses as follows:

Given the concern with their own fundraises and LP management, the most common request for “more of” in the Midwest ecosystem was LP capital. A desire for more collaboration across the ecosystem followed closely, then more aggressive founders, early stage capital, startups and entrepreneurs, and better talent retention.


The economy remains under stress, despite what the financial markets are showing. Nevertheless, the mood has become more optimistic in recent weeks with vaccine news and people starting to see the light at the end of the tunnel. The tech sector has been a relative bright spot. The continued level of activity in the Midwest VC ecosystem is promising, and the outlook for 2021 seems positive. We’re cautiously optimistic about 2021 as the recovery starts to take hold, and expect there to be a flurry of fundraising activity amongst both funds and startups alike.

Thank you to everyone who participated in this survey.

If you would like to hear about and participate in future surveys as either a founder or investor please sign-up for our mailing list.

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Suggestion Box: What else would you like us to write about?

Thanks to my colleagues Julia Ruge and McKay Potter for their help on this survey!

Survey respondents:

  • Total number: 101
  • Responses reflect submissions from October 26 to November 3 2020
  • Types: 77 VC funds, 8 corporate VCs, 7 family offices, 5 angel groups, 1 growth equity fund, 1 evergreen fund, 1 investment partnership, 1 angel investor
  • States: 39 in IL, 10 in OH, 10 in WI, 5 in MI, 5 in MN, 5 in MO, 3 in IN, 2 in GA, 2 in KY, 1 in KS, 1 in NE, 1 in TX, 18 other/undisclosed
  • Stage preferences: 49 pre-seed, 89 seed, 76 post-side/bridge to A, 63 series A, 28 series B or later
  • Investment preferences: 91 B2B, 67 B2B2C, 45 B2C, 86 SaaS, 55 Tech-enabled Services, 46 Marketplaces, 26 Hardware/IoT, 16 Govtech, 14 Consumer Goods/CPG, 14 Medtech (Pharma/BioTech/Med Device)



Jonathan Ellis

Sandalphon Capital, a Pre-Seed to Series A stage Midwest/Midcontinent-focused early stage VC firm