Are VCs cutting checks in the closing days of the 2020 election?

Each investor's perspective is directly informed by their firm's thesis

Before the 2016 election, Vice Ventures founder and general partner Catharine Dockery was bullish about the future of recreational cannabis in the United States.

“We saw quite a bit more optimism around national legalization, with the feeling that a wave of states legalizing recreational use would be the final push needed” to see drug reform, she said. It was good news for Dockery, who was planning to launch a firm investing in categories like cannabis, CBD, psychedelics and sex tech.

She announced a $25 million fund in June 2019, but the national policy landscape had shifted considerably.

“The vitriol and division around the election really haven’t left room for substantive discussions. I think this will eventually change, but don’t have high hopes for much policy debate until the election is complete, if at all,” she said. “In a time of uncertainty, we’re taking a small step back.”

Along with many VC firms, Vice Ventures has raised the bar regarding which startups it will fund, but several investors told TechCrunch they were split about how they’re making decisions in the closing days of the presidential campaign. After a booming summer, some said momentum is increasing, while others told us that expectations have never been higher for startups.

“If anything, the pace is increasing,” said Alexa von Tobel of Inspired Capital. Traditionally, she said founders scale back on fundraising efforts close to the winter holidays because investors’ vacation mentality is kicking in. This year, “I think we’ll continue to see founders taking advantage of the ample flow of capital right now and shore up resources so they can enter 2021 on strong footing,” she said.

While that may be good news for founders, von Tobel said Inspired Capital is not giving too much weight to the election internally.

“We think of ourselves as patient capital, focused on looking for the best companies no matter the timing,” she said. “While we know the election will create noise and have an impact on businesses long term, it does not have a place in our process right now.”

Inspired Capital invests more broadly in the early-stage environment, which plays a part in its ability to invest through crises and turbulence. It seems that firms that have more niche investment theses have been more likely to change their pace ahead of the election.

“We have slowed down our investments to see who wins, which is a total bummer,” said Melinda Moore of Moore Ventures, which invests in startups focused on sustainability and clean energy.

“We are hoping for leadership that believes in science and will embrace an economy/policies that support a lower-carbon economy,” she said. “Biden’s Green New Deal will push for net-zero emissions by 2050,” which she thinks will have a positive impact on clean energy, regenerative farming, and clean air — areas where Moore Ventures seeks long-term opportunities.

Bradley Tusk of Tusk Ventures said he favors startups facing regulatory and legal challenges, but because most tech regulation occurs at the state and local level, startups aren’t as vulnerable to the election, regardless of who wins, he said.

“When times are good, you can afford to have endless fights over things like whether a scooter goes on the street or the sidewalk. but when you’re facing a pandemic, mass unemployment and racial unrest, arguing over scooters seems misplaced,” Tusk told TechCrunch.

Instead, Tusk said a startup might become more attractive if it leans into the “federal anti-tech agenda,” such as a startup with privacy-enhancing tools. He said startups that can generate new revenue or create jobs have more leverage in this environment, although he would be “more hesitant to invest” if a startup required major federal regulatory approval.

On the contrary, Charles Hudson of Precursor Ventures said he isn’t seeing much change among his colleagues.

“I am not seeing or hearing of any VCs who are concerned about the election as it pertains to pacing and timing,” he said. Instead, Hudson said some VCs might be rushing to close their own fundraising efforts ahead of the election.

It makes sense that investors might want to get commitments from limited partners in case chaos and unrest ensues — we’ve seen investment vehicles announced recently by OpenView, Canaan, True Ventures and more. First Round and Khosla filed paperwork for new funds in the past week as well.

Consensus was split regarding over whether startups should start or continue fundraising with just two weeks left to Election Day, but early-stage founders should bear in mind that each VC’s perspective is directly informed by their firm’s thesis and act accordingly.

It’s a messy, nuanced reaction for a messy, nuanced year.