Budding Chinese businesses were running short of funding because of China’s economic slowdown that began last year. Now the coronavirus has shut down large swathes of Chinese commerce and canceled entrepreneurs’ face-to-face meetings with possible backers.
Venture capitalists typically like to meet entrepreneurs personally to get a “feel” for them. Without that personal contact, wallets often stay closed.
Also, angel investors are uncertain of the post-virus economy and are waiting to see what conditions the epidemic leaves in its wake.
In January and February, the number of venture deals dropped 64 percent from the same period in 2019, and the amount of venture capital committed to new deals dropped 66 percent during that time.
Now many of those start-ups are laying off workers, cutting pay for those who remain, and begging the government for bailouts.
To persuade government officials to help, companies “need to seriously look at slimming down by pausing, shuttering, merging, and refocusing,” said David Wei at Vision Knight Capital. “Executives and entrepreneurs cutting their pay is a must. If employees have to suffer, people at the top should suffer more.”
