Why are some VCs we know not panicking about the virus and its effects? Here are 3 reasons:
1.There’s a bunch of dry powder out there. As Pitchbook reported this week, American Venture Capital firms have raised over $100 billion in fund capital over the past two years. This is unprecedented and is money that likely will be deployed. Strategies may shift, but the actual act of investing may continue for many venture firms. In house we have closings scheduled for the rest of the month.
2. The VC playbook is not necessarily concerned with the next 6-12 months. Most VCs engage in strategies that forecast Liquidity Events in 5-10 years. By then, we hope Covid-19 will be a distant memory. This doesn’t mean that there will be no long-term effects of the virus on the American economy or startup ecosystem. It’s probably too soon to make any investment decisions based on such a long term virus-related outlook.
3. This is an opportunity. With so much cash to deploy, some VCs are using this crisis as an opportunity to invest in technologies developed in response to the new environment. As well as existing technologies that are being put to use in new ways in light of current changes. Most experienced Venture Capitalists have lived through one or more downturns. Many view this time as an opportunity to negotiate potentially lucrative equity deals that would not otherwise be available. Others use this time to provide follow on capital to existing investments that might see a market opportunity as a result of the crisis. For each company in the travel, luxury brand, sports, or restaurant business that have been affected by the Coronavirus, there will be someone developing a response, through technology or otherwise, to navigate these industries through this crisis and into the next generation.
Every professional will find the next few months challenging. For those that can seize upon the opportunity to focus on growing their business in new ways the future doesn’t have to be defeatist.