In today’s blog post we will make quite a relevant summary of our guests’ views on the investing, fundraising and basically surviving during COVID-19.
We have chosen 5 episodes in which this topic was discussed. That way you will be able to read about our guests’ vision of the current crisis and the possibilities to get over it.
Jonathan Hung, a Co-Managing Partner (MP) at Unicorn Venture Partners (UVP) and also an experienced entrepreneur:
Jonathan on the COVID-19 outbreak and how it affects business: This is a new reality now which every business is impacted by. We should be social distancing and at the same time trying to survive. Jonathan is now sending e-mails to his portfolio companies asking about their cash situation and a current plan (which is the most important! Whatever their plan was in January or February it’s no longer the same and many companies have had to pivot). The main difficulty is that «we have no idea of when the bottom is» but we will have to come back to normal some day (probably not until another 3-6 months). Advice: If the company is just starting to raise money they should definitely look at their valuations because they must have changed. The company may have to take down-rounds in order to survive. Example: The valuation of one of UVP's portfolio companies, Lime, the electric scooter rental company was 2.4 billion dollars a year and a half ago. Now there are less scooters on streets because they have taken them away (because of social distancing) and a lot of people don't want to use those scooters because of fears of contracting COVID. So you can’t justify a valuation of 2.4 billion. Jonathan is hoping that it will not fall to 400 million dollars as he was told.
Adrian Druzgalski, a Co-founder and CTO at Radius Intelligence and a VP of Engineering at AirTM:
In the current crisis our banks are fine so we do not have fundamental banking crisis. Adrian notes that there is still a lot of room to see what happens next, so we must wait a bit to see how things develop. Advice: As a suggestion to people who are starting their companies right now and want to fundraise, and just need money right now to survive, and to get their companies on their feet, Adrian suggests not to give up and keep trying to raise.He suggests to try as many sources of funding available. So if VC's do'nt want to fund your company, try grants, angel investors, traditional banks, private equity, crowdfunding, soverign wealth funds, friends and family etc. This piece of advice holds true even when there is no deadly pandemic raging around the world. Advice 2: One more piece of advice will be to learn to bootstrap for as long as possible, if you are unable to get funding. Many times it is very attractive to raise money, but being able to bootstrap in very creative ways for as long as possible and not having to reach out for money is still Adrian’s number one piece of advice to fledgling entrepreneurs.
Jason Scharf, the Associate Director at Illumina and a Co-Fund Manager at San Diego Angel Conference:
Speaking of choosing one of the major sources of capital in order to fundraise nowadays. Jason states that generally speaking (and depending on their state) all of them work. However if you want to go to a VC you need to have a very clear position, vision, and plan. Especially right now you need to have a plan on how your business will navigate, thrive, or just survive during COVID and how it will succeed after COVID, when things have gone back to normal.To conclude he advises that you need to choose one of the sources and try it in order to understand if it is right for your company(especially right now).
Phin Upham, the Managing Partner at Haymaker Capital:
Before the COVID-19 outbreak there used to be a different level of intimacy between investors and founders: they knew each other in person and could meet. However now you already know them or you don't which is a great advantage for people with a developed network. So currently Phin mostly reinvests in companies he already knows and has only coompleted one new investment. Fundraising during COVID: COVID has further separated winners from losers. It is more difficult for people to build new relationships, which means that those who had been doing well before are still doing well. The current situation is unfavorable for companies with complex strategies or new companies. Advice for early stage founders: The main goal is not to build more startups but to build good startups, so now is a great time for those who are very dedicated and have some new interesting ideas, that are able «add value» and execute.
Roberto Machado, the CEO at BetaBlocks and a member of Tech Coast Angels.
Robert believes that it is a tough moment to raise money because there is just less money out there. Advice: Roberto highly recommends to be cautious and wise on how your company spends its money, during COVID. He does not see getting better in the short term, it is going to take some time for people to gain confidence again. In essence, he suggests to weather the storm and not go broke, don't use your personal finances and assets, break the bank or sell your house in order to survive or you are going to be in deeper problems. Robert advises «When there's a storm just save energy. When you come out of that storm. A lot of your competitors will be dead. So you are gonna be hopefully in a better situation than before».
The article was written by Elizabeth Belinskaya