Palm Drive Capital Co-founder Seamon Chan urges entrepreneurs to keep their eyes open for opportunities as certain verticals bloom under the COVID cloud, including e-commerce, food delivery, online gaming, healthcare and enterprise software markets.
By Seamon Chan
COVID-19 is shaking up every aspect of our society, from the economy and how businesses are reacting, to even our basic, everyday human interactions. It is having an unprecedented and all-encompassing impact on our society, for which many industry sectors were unprepared.
All businesses – the small, the medium and the massive global conglomerates – have felt the effects, and the economic implications of this pandemic are very likely to affect them for a long time, years after this has ended.
We have already seen overall VC investment activity go down, particularly as venture capital firms are slowly using their reserves to support their portfolio companies and going slow on fundraising for new investment funds.
The investment world has always been characterized by a degree of uncertainty, and this is now heightened. Follow-on investments into portfolio companies will most likely be a priority now, regardless of the company’s size.
Investors want their portfolio companies to survive. Not just because it is part of the job, but because many investors, us included, have faith in our portfolio companies and in what they have to offer the world. Investing is our passion, so we are here to make sure our investments do well in both good times and bad times.
With this is mind, we would like to share some of our top tips for startups on how to weather the COVID-19 storm.
Create a risk plan
The first thing to do is sit down and create a risk plan. Assess your cash flow, update any sales forecasts, update your funding plans, and make sure to close the funding you have and tie off any loose ends. It is important to be aware of where every cent is going and evaluate the worth of keeping any extra, unnecessary costs.
It also may be necessary to cut down on some essential costs, for example, reducing a percentage of salaries. It may be an uncomfortable action now, but it will definitely have a positive impact on the cash balance later.
Keep communications channels open
Keeping open communication channels with your employees is crucial. Everyone reacts differently in a crisis – work morale may go down, people may have new or more responsibilities, family circumstances may change, and everyone will be concerned about the financial security of their future.
It is important that you listen, assess the situation and support accordingly. Take care of your team and the people around you, keep them in the loop on how the company is doing and give them the good as well as the bad news. Be upfront about what is happening and what you are expecting, it will keep the panic at bay and morale high.
Do your research
Ensure you have an up-to-date view on the situation. The more you stay aware of what is happening, the more time you have to prepare. Every extra minute is an advantage in this unpredictable overall situation.
Do your research and see what opportunities are open to you. More and more governments are rolling out COVID-19 schemes to help protect businesses, so if there is a program or grant that you can apply for, then do it. It can only help you avoid running into cash flow problems in the future.
Stay nimble and up for change
Be flexible. Take note of the new trends that are coming up, and the new social issues we are facing. Is there a way for your company to adapt and to become part of the solution? There are certain verticals that are booming at the moment, for example e-commerce, food delivery, online gaming and entertainment industries, the healthcare tech sectors, and enterprise software tools to make working remotely all that much easier.
If you are selling a product or a service, focus on the online experience, and try to make people’s lives at home that decisive bit better.
Yes, the overall investment pace will slow down, however, it will not come to a standstill. Entrepreneurs should not be discouraged; this crisis has created an opportunity for people to build companies that address problems in the world, problems that a few months ago we didn’t know could ever exist.
It is important to remember in such uncertain times, when nothing seems to make sense, that it is now when the best ideas are born. In fact, some very successful companies came out of previous recessions.
VCs and investors will continue to invest and analyze new investment opportunities. We will continue to do thorough research, be strategic with providing capital, and focus on the companies and ideas with the most potential and the most to offer the world. We will continue to support innovation that will make people’s lives better and last through this pandemic and beyond.
(Ed. Before co-founding Palm Drive Capital, Seamon Chan says he worked at Insight Venture Partners, a USD 23 billion venture capital and growth equity firm with investments in JD.com and Alibaba. Seamon Chan is a Stanford graduate and is completing the OPM program at Harvard Business School.)