How are Funders Responding to the COVID-19 Pandemic?
There has not been a uniform response from the financial community to this new pandemic. Some funders have proactively sought to contribute, whilst others have tried to remain outside of the issue. Moreover, the kinds of ways that funders who have been taking action are diverse, showcasing several innovative approaches to tackling this crisis.
We analysed the data from our Capital Finder, and after several stages of analysis produced a set of funders who are openly using financial tools to respond to COVID-19. We have embedded this as a live sheet so that you are can run your own analysis on the data:
Emerging Trends
Using our data, we can observe and break down trends in funders’ responses. The first thing to note is that whilst many funders are discussing this issue, very few are responding to it. We used natural language processing to analyse our data in the Capital Finder and identify funders who were discussing this issue: of the 117 funders we identified, only 30% (35) were engaging with the pandemic in a meaningful fashion. By ‘meaningful’, we mean these 35 funders were distinguished on the basis of their taking positive actions towards aiding in the effort to combat COVID-19. This ranged from Syngenta, an agro-VC supplying vital equipment such as hand sanitisers, to Elevar, a nonprofit that is delivering virtual workshops in Thailand.
Looking at these 35 funders more closely, we have identified 24 which are responding with financial instruments. Taking a step back, this represents just 21% of the initial 117 highest scoring funders. So immediately we can see that few who are discussing COVID-19 are actively engaging with efforts to tackle it.
One of the main contributing factors is the low rate amongst Venture Capital and Private Equity Firms.
Venture Capital and Private Equity firms are the stand-out funders who are discussing the issue far more than they are responding are. They make up 38% of our total sample size but only 16.7% of those funders we later identified as using financial instruments to address the crisis. This reflects a below average rate of response: our sample average of funders also financially responding is at 21% — this drops to just 9% for Venture Capital and Private Equity funders. To compare: Crowdfunding, Foundations, and Nonprofits are all at a ~30% funding rate. This can be explained by the fact that while nonprofits, foundations, and (many) crowdfunding platforms are offering grants to companies that are responding to the pandemic, VCs and PE firms are looking at firms as an investment opportunity. As this is a novel virus and the research behind it is highly technical, they may not have the expertise to choose one firm over another to invest in.
A Look at the Responses
Nonetheless, there are a number of funders doing really interesting work to support COVID-19 relief efforts.
Oikocredit is an impact investor working across the world providing loans and equity investments. They are joining with other members of the Dutch Platform for Inclusive Finance (NpM) in their efforts to tackle COVID-19 in emerging markets. Unlike some other investors, who are tackling this issue from a solitary position, Oiko sees opportunity in exchanging and coordinating information with other members of the impact investing community. In theory this level of coordination ought to prevent financial overcrowding in areas, evenly distributing investments across those who need it most: creating pareto efficient outcomes through coordination is a basic economic concept, but not one we always see amongst the financial community. Watching Oikocredit take this step at this time is a welcomed sight.
Piramal is leveraging its unique position constituting both private-business components and a foundation. Alongside the broader Piramal group investing over USD$3 million, the Piramal Foundation is utilising its unique public-private partnership models across India to support COVID-19 relief efforts. Working with the Indian government, the Piramal Foundation is channeling resources into the remotest areas of the country. It is setting up health advisory and relief measures to underserved communities without access to information, doctors, and hospital.
The Piramal group is setting a good example of how it can both fund relief efforts in the classical sense, and also invest funds through its foundation which has specific experience reaching underserved communities.
Our earlier discussion looked at how Venture Capital and Private Equity firms in general were highly engaged in discussing COVID-19 but far less so in responding to it. Y Combinator, a seed funding VC, stands apart from its peers on this front. More than 25 Y Combinator bio and healthcare companies are tackling the pandemic, and Y Combinator is driving forwards funding for them. This isn’t all they’re doing either. Y Combinator, unlike many VCs like it, is also asking for external funders to help them increase capital to its investees to scale up efforts. Moreover, they are openly seeking to link up their investees with healthcare experts to maximise their potential impact. Y Combinator’s multifocal approach incorporating internal funding, external funding, and human connections, is a shining example of how Venture Capitalists can take a proactive role in this crisis.
As a final look, we thought it good to showcase some of the work that’s also going on in the public sector. Fogarty is a part of the National Institute of Health (NIH) in the USA, which supports international medical and behavioural research. Both NIH and Fogarty are doing important research of their own to help provide global solutions for COVID-19. What they are also doing that is of particular note here, is setting up and advertising COVID-19 specific funding opportunities. Throughout our research, this was the broadest collection of funding opportunities specific to COVID-19. Information is just as valuable as monetary investments at a time like this, and Fogarty is taking a leading role on both fronts.
Key Takeaways
Not all funders are responding to this pandemic in the same way. Throughout this piece we have discussed the variation between those who discuss the issue and those who respond to it, and then also the variety that exists within those who are responding. We included the live sheet above so that entrepreneurs can use our data openly. As we have discussed, sharing information is crucial at times like these, and our data can help inform those making important decisions.
If you have questions about how the Capital Finder can be used to identify funding opportunities for entrepreneurs, don’t hesitate to get in touch!
