With the last publications and economies stimulus across the world, we can ask ourselves, how these actions would impact the different industries but also VC, investors and startups ecosystem.
These stimulus packages did not follow the same approach or logic. From “free” loans approach, liquidity support, working scheme to avoid restructuring, some government are more actively supporting startups than others.
Whatever scenario we look at, the recovery timeline is very debatable and variant from a continent to another.
One thing for sure is that compared to 2008–2009 economic and financial crisis, there are clearly different dimensions and it is difficult at this stage to derive any conclusions.
We have started seeing a t slowdown in terms of VC Funding already a few weeks after the start of the lockdowns. Some VC firms tried to reorganise accordingly by keeping video calls, hackathons, and other initiatives to keep communication going with their portfolio companies, trying to optimise their costs and cash reserves. For the new opportunities and deals and or ongoing fund raising rounds, the situation is different. Scrutiny on deals is higher and opening a first question on the volume of the deals.
Shall we expect less deals in terms of volume?
Shall we expect an adjustment in the mix in terms of verticals?
How some VCs will adjust their investment thesis accordingly? Shall we see more movements from the Bay to Europe? Or China to Europe?
Are supply chains and production systems going to be reinvented too?
Articles earlier last week were talking about the attitude of certain investors in terms of valuation, signalling and confirming that there would less available capital in the market. Last recession, following last Pitchbook report, did not show a decline in deal value between 2018 and 2019 for seed and angel investments. Source: Pitchbook Q1 2020
What is the role of business angels in this context? Some are playing rightly the role of firemen, coaches, and advisors in these difficult times. But what does this mean for their future investments and ongoing due diligences? We can expect that some of them would focus on their existing investments, focusing on follow-on rounds and/or limiting their exposure in terms of asset class. Some others willing to strengthen their portfolios would be more willing to pick the future “homerun” and build the diversification that they were still aiming for.
In terms of verticals, Video conferencing, food delivery, gaming, ecommerce and health so far had been outperforming the markets. Scepticism about certain technologies and applications, irrespective of regulation, privacy will be most probably lifted.
Telemedicine e.g. although around for a certain time was considered as a niche, is it somehow a choice now with hospitals not able to manage patients and shortage of beds is a reality?
One could challenge that some outstanding startups were born during recession times. That’s absolutely true. Examples include Uber and Airbnb. In this depressive media storm, we should remind ourselves these successes. So what are the new players that will rewrite the code? redefine new business models?
“Resource scarcity should be a driver for creativity and innovation” and “recessions will make room for disruption”. So let’s champion the entrepreneurs that will rewrite the new chapter!