The public market is not the only one feeling the effects of coronavirus. Entrepreneurs and private companies seeking capital are beginning to see a structural and behavioral shift take place in Silicon Valley from venture capitalists due to COVID-19. Yahoo Finance's Melody Hahm joins Yahoo Finance Live to break things down.

Video Transcript

JEN ROGERS: It's tough enough if you're just a regular legacy company trying to do business in this new environment. But what if you are a startup and in Silicon Valley in venture capital? Melody Hahm has been digging into this story because it certainly presents a lot of different challenges out there for entrepreneurs.

I was talking to somebody who just went through a round of funding and is actually pretty happy because they think they've got the capital now. And other people are out in the funding market and aren't going to be able to compete. So it seems like there are some winners and losers here in Silicon Valley. What are you hearing?

MELODY HAHM: And even with that funding in the pocket, right, Jen, that doesn't mean that's going to last them more than six months, especially if perhaps they had anticipated OK, I can go off of this for a couple years and perhaps plan for an IPO. I think the future exit strategy and trajectory certainly looking more murkier now.

I've spoken with several VCs as well as entrepreneurs, so people on both sides of the table. And from the VC perspective, it's fascinating to hear that this is actually a huge investment opportunity for them, especially for sophisticated LPs. Because they can actually present less than favorable term sheets to a lot of these entrepreneurs. And some might call this vulture investing, which we have heard a lot over the last 20 years, post dot come bubble.

We've seen more and more of these kinds of opportunities pop up, although over the last couple of years, because there were so many top tier premium VCs vying for hot startups, honestly, entrepreneurs had the right hand, right? They had the upper hand to really negotiate these deals. That sort of pyramid has inverted, according to a lot of my conversations.

But I do have to say, this pandemic was a good cover for many startups that had unhealthy balance sheets going into this. And VCs within the biotech and digital heavy space, with those kinds of portfolios, are really capitalizing on the opportunity to inform and advise their portfolio companies to pivot.

Take, for example, Everley Well, which is offering those at-home diagnostic kits. We had the CEO on last week, and they previously were just doing tests for diabetes, STIs, and now we're seeing they're completely going 180. And most of their resources are now dedicated to the coronavirus.

So companies that have the flexibility to make those sorts of slight shifts in their business model, they will be the ultimate winners in this case. I have to share a comment that a VC told me yesterday. He said, now we won't see every company getting funded. Investors are willing to not reup, even if it seems like a decent opportunity. And they will frankly let them die.

Insiders aren't going to support them to get new capital because they can't even meet new investors in person, even if they wanted to. It's a really tricky period if you're a company with less than 12 months of runway, and you're not a significant outperformer in this current period of time. It's very likely that by 2021, we will see most of these companies in that middle space die.

And even to the Starry CEO's point earlier, I think it's really astute to say the likes of WeWork, which we had already been critical of over this period of time, I think there will be new questions posited, saying, hey, are these sorts of behaviors that we had shown prior to the pandemic, will we revert back to that? I think the answer can be no in a lot of those situations. And a lot of those, quote unquote, utilities and nice to haves will, unfortunately, be the first things to go, when entrepreneurs are thinking about how to build out their business.

JEN ROGERS: Right, the behavioral change that we're all witnessing and being a part of can affect a lot of business plans pretty hard. Melody Hahm with the story out of California.