With the coronavirus disrupting our daily lives, it is hard to look forward and see what the future holds. That is, however, one of the core-activities of investors and VC’s. How are they approaching new investments in these unprecedented times? We spoke with three Amsterdam-based VCs including Peak Capital, Newion Investment and ASIF Ventures, to find out how they are faring.
Peak: ‘Always looking for companies’
The good news is, investors are still looking for good companies to invest their money in. None of the VCs we spoke to say they keep their wallets in their pockets. “We are always looking for companies that offer painkillers, not vitamins. Startups that offer a solution for a problem, and solve people’s pain. Those companies are less affected than the nice-to-haves,” says Johan van Mil, partner at Amsterdam-based VC Peak Capital. Just this week, Peak announced a €2.5 million investment round for German SaaS platform GraphCMS. Despite making it seem like it’s business as usual, some things are definitely different. Van Mil says: “I only saw the German team once. The rest was done through video calls. We invest in young companies, so our investments are also based on who the founder are.” With measures to prevent the virus from spreading, van Mil now has to make these judgement calls based on video calls.”
Newion: ‘Figure out how robust the business model is’
For Patrick Polak, partner of Newion, the restricted travel is more of a trouble. “With 23 years of early-stage VC investing, I’m probably way too conservative, but I cannot wait to travel again and meet people, with a 6 feet distance. Bring it on!” Virtual meetings before making an investment do not really cut it for him. “Since we invest in Seed and Series A rounds, these companies have limited data points. And obviously you would like to give as much context to these data points to assess the opportunities and risks. Today we also need to figure out how robust the business model and proposition are in these particular times. In-person meetings are super important for this: the entrepreneurs must choose the right investor to accompany them on their journey – and not just because they bring a bag of money alone please – and we investors want to assess the business partner where we will start a business marriage for the next 5 to 7 years.”
ASIF: ‘We look beyond the coming year’
For ASIF Ventures, the student-led fund from Amsterdam, this same long term thinking is a reason not to worry too much about the current crisis. ASIF recently announced investments in Bluetick and LALALand.
According to ASIF-director Tom McDonald, there’s no reason to change their focus: “The coronavirus doesn’t have a big impact on how we make investments. We try to look beyond the coming year, because we make investments for the long term. The coronavirus will probably have a lasting effect on our society. We try to incorporate this into our decision making wherever possible.”
Effect of COVID-19 on the startup scene
This lasting effect might also have a positive twist for the Amsterdam startup scene. It validates what many startups are already doing. Van Mil: “I think the coronavirus will have the biggest impact in leisure, travel and retail. But there will always be a demand for products or services that offer a solution to a problem. We mostly invest in software and online marketplaces, so these are already banking on a remote society.” McDonald continues: “We expect that not only startups but also consumers will be more susceptible to tech solutions. People instantly switched to Zoom, ordering food and groceries online.”
“We also expect big chances for creative ideas from people that, without the corona crisis, would’ve never made the step to turn it into a company. Many people have less obligations and more time to work on side projects. The quality and quantity of startups will skyrocket in the short term with this new diversity of entrepreneurs. It’ll be very interesting.
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Polak sees a similar development in the startup scene for the near future but adds some words of caution: “Let’s be utterly honest, blunt, and clear about this; starting a company is super risky. The chances that you will make it are small. All the right puzzle pieces must fit, at the right moment. Product, team, market, competition, funding, luck, you name it. With the massive head-winds, we have today, it has not become easier. Society and the economy will change, which brings challenges, and opportunities. Some value propositions are more COVID-19 robust than others. We live in unprecedented times, and that is extremely tough. But entrepreneurs are resilient, innovative, inspirational, clever, and creative.”
Tips for startups looking for funding
According to the VCs, startups looking for funding do not need to despair. Or as Polak puts it: “All professional doors are open.” However, he continues that now more than ever it is all about working in a partnership with an investor that understands your business, to find not only money but also experience and knowledge: “To convince investors, you must show realistic projections and show the “Covid-19 robustness” of your business. On our website, you can find some guidance on how to write a proper deck and make it “Covid-19 tested”.
McDonald from ASIF agrees that the doors remain open. “A lot of VC’s are still looking for a solid dealflow. Many of them think in windows of 6 to 10 years. With what we know now, the coronavirus will have limited impact on that. But do show you’ve thought about the crisis and how to position yourself within the new market or sector in which you operate.”
At Peak Capital, they’ve even taken it upon them to give founders easier access to funding in the coronacrisis. Van Mil: “We started Fast Fund Friday, a new European initiative which serves as a fast-track to an investment. Usually, it can take a lot of time before a decision is being made at the level of the partners. But at Fund Fast Friday we make this a lot faster. If we like your idea, you can have a place at the table with me or our other partner within a week.” And for founders who like to keep their social distance and are anxious to be in one room, let alone at one table, with other people, van Mil quickly nuances: “Ok, it’s going to be Zoom-calls. But the end result will be the same.”