Ask a Venture Capitalist
In light of current events, I had the pleasure of moderating a panel with Russell Buckley from Kindred Capital, Carmen Alfonso Rico from Samaipata VC and Rogan Angelini-Hurll from PROfounders Capital. The founders who are currently part of our London Program took a (virtual) front-row seat, getting the opportunity to ask the questions we believe have been crossing almost every entrepreneur’s mind lately.
In the current highly volatile economic environment, have investment criteria changed for the funds you manage?
‘No, not really’ our panel said in unison.
The key factors that they look for are still the same: strong teams with complementary skills, resilience, innovation and scalability. In terms of markets, we are all in the same boat, trying to understand where we might end up ‘post COVID’ and what trends will emerge. It might be tempting for some to be opportunistic and short-sighted, but we are not talking about where we will be in 6 months. Investing in early-stage companies is a long-term commitment with a time span of roughly 5–10 years, so the opportunity disguised as a challenge here is to understand how these trends will evolve and mature over time.
“Some of the great companies existing today were born out of a time of turmoil. The reason for their success is not the timing itself, but rather that they tapped into new trends and behaviours that emerged”
- Rogan Angelini-Hurll
Inevitably, there will be some short-term effects on the investment climate, such as a temporary slowdown and VCs being more selective. In fact, this might be a much-needed tactic due to the amount of capital that has recently been invested in companies replicating already done business models rather than innovative new ideas.
Have you blacklisted or whitelisted industries?
The conversation moved onto the elephant in the room — are VCs blacklisting any areas or industries? Again, the answer across the board was simply ‘no’, mainly for two reasons: 1) It is hard to blacklist anything when it comes to long-term investing 2) Industries that have been hit hard by the current situation, such as offline retail, have lately not been a focus area for the VCs on the panel.
We can already see how remote life and social distancing are accelerating change. Businesses and industries who have been talking about ‘digital transformation’ for years are now moving quicker than ever, from remote working options to digitalising their customer experiences. This speeds up the adoption of, for example, live-stream, remote working tools, gig economy, and gaming.
“To many, the conversation is about ‘how do we replicate face-to-face communication online’. Maybe it is not about replicating it? Maybe it is about reinventing it. The most interesting projects will be those rethinking communication completely”
- Carmen Alfonso Rico
This is why VCs now need to look at their own investment strategies and portfolios retrospectively and ask: do we as a group actually invest in innovation? Are we not yet tired of hearing pitches starting with ‘We are the Amazon of x’? Now is the time for all of us, VCs, angels and entrepreneurs, to get back to the drawing board and completely rethink how we do things.
So, are they still investing?
Finally, the million-dollar question, literally: do VCs still invest? They certainly do, even though we might see a reduced appetite for what some would call unnecessary risk-taking.
“What we have to remember is that what we see now is an extreme event, but we are living in a time of extreme events. The world is changing much quicker than we have ever seen before and with that comes the opportunity to do things differently”
- Russell Buckley
All the VCs on the panel are still closing deals and they want to assure entrepreneurs out there that they have money to deploy — especially as they all invest in tech and digitalisation. However, they do mention that they have heard of other VCs backing out of deals, but we can’t know for sure the real reasons for this.
To sum up:
- Has investment criteria changed? No
- Any industries that are blacklisted? No
- Do VCs still invest? Yes
The final words are not to let short-term thinking cloud your judgment. From a business perspective, (try) not to worry about the next 3 months. Keep calm and carry on.
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Interested in knowing more about our portfolio companies? Get in contact with me at lars@antler.co.
