'The world has changed': A third of investors pulled seed deals this month amid fears coronavirus could trigger a global recession

'The world has changed': A third of investors pulled seed deals this month amid fears coronavirus could trigger a global recession

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Investors fear coronavirus will spark a recession in the coming months

  • A third of investors pulled out of UK seed funding rounds in March as the threat of a recession driven by the coronavirus pandemic looms.
  • UK chancellor Rishi Sunak has been accused of leading startups "to the slaughterhouse" amid calls for the government to help save thousands of UK startups from collapse.
  • Anthony Rose, CEO of SeedLegals, said the reality is "some companies are just less investible now".
  • Seed funding has dropped 22% around the world since January, according to data from investment analysis firm CB Insights.
  • Visit Business Insider's homepage for more stories.

Jittery investors are fleeing from risky early-stage startups thanks to alarm over the coronavirus pandemic, new data shows.

Almost a third of investors pulled out of UK seed funding deals in the past month, amid fears the pandemic could trigger a global recession.


SeedLegals, the London-based firm specializing in legal advice for smaller startups, said the number of venture capitalists (VCs) participating in early-stage funding rounds for startups dropped by 28% in March.

It comes as Rishi Sunak, the British chancellor, stood accused of leading startups "to the slaughterhouse" by some, after investments made through the UK government's founder-friendly investment scheme tanked by 70%.

SeedLegals, which claims to oversee around 10% of early-stage investment rounds in the UK, said that although fewer VCs were now taking part in such rounds, the overall number of deals being closed had risen 19% since January, as backers and founders try to settle their accounts ahead of the new tax year in April.


Speaking to Business Insider, Anthony Rose, the cofounder and CEO of SeedLegals, said: "The world has changed."

He added: "Broadly speaking, there are two key things happening at the moment: First, some investors - angels and other firms - are getting cold feet. They feel uncertain about the future, and they are doing their best to keep their own house in order.

"Second - and the sad reality of it is - some companies are just less investible today than they were a few weeks ago."


According to data from CB Insights, seed funding has dropped 22% globally since January, as investors come to terms with this new reality.

Business Insider previously reported how the threat of a global recession has intensified negotiations between founders and investors in recent weeks.

One founder, who spoke to us on the condition of anonymity, said discussions around renewed valuations had been "ridiculous".


They added: "It's like they're trying to f--- us."

British investors, including Lastminute.com cofounder Brent Hoberman, have called on the government to rescue early-stage companies with a dedicated fund. Hoberman, Capital Enterprise, and other funders have pitched a $350 million "runway fund" that would be part private, part government-funded.

"This came from the fact that there are lots of very good startups across the UK, but when the music stops, the music stops," Hoberman told Business Insider earlier in March. "There are perfectly good companies going to private individuals or early-stage funds that won't get funded."