‘How is the psychology of Covid impacting your investment strategy?’
The panel, moderated by Brett Putter of CultureGene, comprised investors from across sectors: Alliott Cole of Octopus Ventures, Fred Destin of Stride.VC, Sajjad Kamal of Global VC, Jambu Palaniappan of OMERS Ventures, Ashish Patel of Optum Ventures, Edward Stevenson of SFC Capital and Donna Taylor of DENSO.
While the discussion was held under the Chatham House Rule, we liked the questions and posed them to Samarth for this post.
How are you and your firm dealing with the Covid challenges? What have you changed? What’s working, what’s not? Deal sourcing. building rapport, evaluating leadership and teams
We are — like most venture firms — a relatively small team of 10, of which 7 in St. Louis, and 1 each in New York, Hong Kong / Singapore and Amsterdam / Frankfurt (that’s me). That meant within the team we were rather remote already.
On the other hand, as we setup a physical presence in Europe, my approach over the last 1.5 years was (fortunately) quite a lot of in-the-flesh meetings and events — on the road, in the air, and even water (more about that here).
This has stood us in good stead so far, as most of the investments we closed post-COVID here in Europe (and even South Africa) were in founders we had met in person. For new investments where we haven’t met the founder in person, I have tried to do so in the final stages.
Video calls and virtual events work fine for deal sourcing and (part of) building rapport, but fall short when evaluating leadership and teams- key to the post-Seed/ Series A phase that is our sweet spot.
How has the investment landscape been impacted by COVID-19 — positively/negatively?
Most smaller, non-institutional funds as well as angel investors have paused investments or become opportunistic. For us (and most other institutional investors in our co-investor network), it has been a mixed bag, with some sub-sectors impacted positively and others negatively.
We analysed our portfolio and planned conservative scenarios back in April, and have been more stringent in evaluating deals. All in all, we have been pleased with the operating intuition of portfolio company leadership teams, and we continue to find and fund attractive investment opportunities
The slowdown (freezing up of VC dollars) hasn’t happened as people expected. It may yet happen in 2021. Economic uncertainty persists and if people get scared, they will get scared fast. What is your firm’s approach to the uncertainty? Do you think there will be a freezing up?
At the outset, I would vehemently agree that indeed, the freezing up of VC dollars, economic downturn and the scare may yet happen in 2021.
As investors in Enterprise Technology/ B2B SaaS firms focused on the financial services sector, we will of course be dependent on the sector dynamics.
So far, I would say the sector situation is “yellow”, based on the assumption that the impact of COVID-19 can be minimised by mid-2021, although sub-sectors like lending (or challenger banking) are verging on “red” already. In general, we expect Enterprise Tech/ B2B players to be less badly hit than B2C players, and see that reflected in the move of investor money to wards B2B.
What are you doing to help your portfolio companies adapt to the culture changes required of remote or hybrid work? Do you believe that this transition to remote or hybrid work is a latent threat to your companies?
We observed an interesting mix of work cultures among our portfolio companies, some “born virtual” who just stayed that way, and others who had 25+ staff coming into office every day. It took maybe a month or two for the latter to realise that COVID-19 isn’t going away any time soon and to switch to a remote or hybrid model. In either case, most of them moved fast and took the right decisions.
While operations and technology teams can work well virtually, I feel the sales and business development efforts are either delayed or stalled and will be the harder nut to crack for most of our portfolio firms, as most of them sell into large financial institutions.
Are you seeing an increase in burnout or mental health issues in your portfolios?
I think we are all trying to find ways to adjust to the situation. Staff who were hit by the triple whammy of being just before a fundraise, having to run a team (and sell) remotely while managing a family with young children at home are probably the worst hit.
Apart from that, being in a sector that is not as directly impacted as say the travel, tourism and hospitality sector, we better get our act right and work twice as hard through this period.