Editor’s note: Investor and entrepreneur David Gardner is founder of Cofounders Capital in Cary and is a regular contributor to WRAL TechWire.

CARY –  Not many of us are sad to see 2020 go but besides all of the obvious misery for startups last year there have been a few positive changes brought on by the pandemic.  We have seen these changes play out in our portfolio companies at Cofounders Capital and I believe these changes will become a permanent part of the startup landscape for entrepreneurs and investors.

  1. Startups will have a wider and better candidate pool from which to hire.

Our early-stage management teams, for the most part, worked from their homes since last March.   Since they were all working remotely anyway, there has been less benefit in hiring local candidates.  This opened up a much larger national candidate pool for them to hire from as well as less aversion from top candidates to work for an out-of-state company.  These hires have worked out well for our companies and given this experience, I see no reason why it would change once the pandemic has passed.  The new prevailing attitude is, even if you are a small local startup, hire the best candidates wherever they are and let them work remotely.   I believe this philosophy will continue to be a best practice post pandemic.

  1. Recurring revenue startups are considered safer early-stage investments by investors than most other types of startups.

Our SaaS-based portfolios have weathered the pandemic surprisingly well mostly due to their subscription-based recurring revenue.  Unlike many retail, hotel and restaurant businesses that must continue to make new sales every month to survive, subscription revenue with one to five-year contracts in place have much smoother top-lines.   It may seem obvious that these types of companies are more recession-proof, pandemic-proof, and more crisis-proof in general than other investment options but nothing drives a point like this home to investors like watching a promising investment sink below the waves of a short-term crisis.   Unfortunately, investors know that Covid-19 is most likely not our last pandemic or economic recession so investments that can better weather such crises in the future will be more desirable in light of our 2020 experiences.

  1. Startups Will Garner More Investments From Non-Local  Investors.  

I realize that this may be  more of a hope than a prediction but it seems to me that as angels and early-stage venture funds have gotten exponentially more comfortable with virtual meetings in 2020, they will also get more comfortable with making and managing more remote investments this way into the future..  If all of your interaction with your entrepreneurs is virtual anyway, and their management teams are working remotely from diverse geographies, then why does it matter where the startup is actually incorporated?   Granted, some investors, like the investors in our funds, have a stated preference for investing locally.  They want to see their investment dollars poured back into where they live and their local economy but it stands to reason that purely financial investors and those with a more passive approach will be considering a much larger target geography following 2020.

  1. Startups Will Increasingly Value More Experienced Investors With Expertise and Deeper Pockets.

A common mistake I made as an entrepreneur and one we still see made very often today is that entrepreneurs tend to take money from whoever offers them the highest valuation.  This makes sense if all the founders are considering is their equity dilution but when a crisis hits, as they always do at some point be it a pandemic or otherwise, who you have in your corner is generally far more important than that extra point or two or equity a founder managed to hold onto.  Early-stage companies that were backed by well-managed funds have cash reserves available and good coaching for right-sizing their ventures when storms ahead are brewing.  Our portfolio companies survived 2020 in no small part because of these factors.   Entrepreneurs whose ventures did not survive 2020 took no solace in their extra couple of equity points.  Entrepreneurs that have thrived or failed through a crisis like last year will now put more of a premium on finding the right partner for their venture.