Term sheet turbulence: Startups on a bumpy journey

Venture capital investment in Europe is slowing down — but it hasn’t stopped. In March, €2bn was raised by European startups, and there were 108 rounds above €2m, according to data analyst Dealroom; around a 33% drop in activity from January. April is looking likely to be even slower — yet hundreds of term sheets are still going out, companies are still raising rounds (some big ones) and investors are still on the lookout for appetising investments. 
However, many of those March deals were in the works pre-crisis — and didn’t pan out quite as originally anticipated. Valuations are dropping, some investors have been getting cold feet while other rounds have been closing faster than ever in a bid to just get deals done, and some term sheets have been renegotiated.
To understand what coronavirus means for startup fundraising in the longer term, the next three months will be far more revealing. “Year-on-year Q2 numbers are going to tell a different tale to year-on-year Q1 numbers,” says Daniel Glazer, partner at Wilson Sonsini, a law firm that works with US and European tech companies. 
“A market-standard April 2020 term sheet is not the same as a November 2019 term sheet,” adds Glazer. “There’s a spectrum of what’s reasonable, and we’ve unsurprisingly gone from the founder-friendly side of that spectrum to the investor-friendly side.” 
Let’s take a closer look at what’s happening now — and might happen next.

By Amy Lewin