Over 250 Kauffman Fellows and VCs from all continents held a two day Zoom Conference last week to examine the effect of COVID on investment practices. The Kauffman Fellows Program is a network of over 500 VCs and entrepreneurs. Our Dr. Patricia Beckmann, a Kauffman Fellow, participated in the brainstorming session to encourage sharing and best practices.
Dr. Patricia Beckmann is the Entrepreneurial Program Coordinator and Grant Administrator for AZBio supporting the Economic Development Association’s Seed Fund Grant at AZBio. Patricia’s overall career spans research, operations, law and venture capital.
They heard from luminaries, including Brad Feld – Founder of Techstars; Jenny Lee – Managing Partner at GGV Capital; Jay Butler, M.D. – Deputy Director, CDC; and Mamoon Hamid, Partner, Kleiner Perkins.
Topics included, Lessons Learned from China, Investment in Uncertainty and Valuations in the age of COVID. Overall the focus was:
- Managing Portfolios
- Investment Outlook
- Future Trends and
- Supporting Companies and Entrepreneurs
Managing Portfolios
There is no cookie cutter formula for companies. Founders should consider cutting salary in favor of stock options. Save Cash. Drive for Efficiency and lean down on personnel. A company with 12 months cash on hand may Consider Hiring new talent. Avoid Bridge Loans to nowhere.
Investment Outlook
April and May will be terrible. June will be a little better. If companies are fundraising – Close Financing ASAP and consider Valuations Soft. If you haven’t started fundraising – don’t bother. Fewer new investments will be made as VCs strive to support portfolio companies. Unless, it is a radically new idea that fits the new post-COVID paradigm.
Future Trends
New business models have become apparent because of COVID-19, such as Healthcare, Telemedicine, On Line Learning, Online Grocery whereas brick and mortar investments are stalled. More deals will be done Virtually, with VCs never meeting entrepreneurs. However, the advantage here goes to Serial Entrepreneurs with a track record of performance.
Supporting Companies and Entrepreneurs
All of the VCs suggest checking in with company CEOs every few weeks. Help them understand that everyone will have an “asterisk” on the balance sheets. They won’t be performing on their current plans until 2021 or 2022. 2020 will be an adjustment time, position for growth in 2021. Importantly, support the CEO and the company’s Mental Health and acknowledge that the effects will go on for a long time.
Summary
The most important takeaways for both VCs and Entrepreneurs came from Brad Feld who suggested: There is no Playbook for this. Have Situational Awareness. Act Deliberately if you have enough awareness to make a decision.
About the Author:
Dr. Patricia Beckmann is the Entrepreneurial Program Coordinator and Grant Administrator for AZBio supporting the Economic Development Association’s Seed Fund Grant at AZBio. Patricia’s overall career spans research, operations, law and venture capital. Learn More