For Triangle-area venture capital firms and angel networks, not much has changed in the past few weeks. Except, portfolio companies are either really up or really down, and a lot of their own investors are taking hits in the stock market and in their businesses. Oh, and now everything has to be done virtually.
They’re fighting the virus the best way they know how—through communication, local firm and network leaders said. The advice to their portfolio companies and investors alike has been to stay calm.
Mark Friedman, president of angel network RTP Capital Associates, told his companies that cash is king, and now is not the time to be burning it. He’s always advised companies to keep in touch with their investors, and said that now is when that communication pays off.
“Everyone’s life has been turned upside down,” he said. “We’re concerned about safety and finances. We’re in uncharted territory and the best thing is to try and keep your own head as clear as possible.”
Both Added Risks And Opportunities
Jason Caplain, general partner at Bull City Ventures, said a couple of his portfolio companies have had to let a small portion of their workforce go as an effort to tighten their belts during this time. However, some of the companies are doing really well. Maryland-based Attila Security, one such company, specializes in cybersecurity for employees working remotely and is seeing an increase in business.
“Our firm was born in the late 2001 time frame in a significant market downturn,” Caplain said. “We were also investing in 2008 and 2009. This feels a lot different. Having said that, I’m totally convinced that we’ll get through it.”
As for Bull City Ventures’ limited partners—i.e. the investors in BCVP’s funds—Caplain has reassured them that the firm is sticking to its playbook and not making any rash decisions.
At Cofounders Capital, partner Tim McLoughlin has reminded his portfolio companies that their relationship with investors is like a marriage—it lasts through the good times and the bad. He said for companies to not assume that sales will drop, but to model the worst-case scenario just in case.
For emerging startups looking for investments, the advice is a bit different. Friedman, Caplain, McLoughlin and Lister Delgado, managing partner at IDEA Fund Partners, all said that their firms are still taking pitches. However, not as much funding will be as readily available.
“For all fundraising across the board,” Caplain said, speaking to startups. “Be prepared for raising smaller amounts, lower valuations, and it taking three times as long to get a deal done.”
Time To Talk
But, this could also be a unique time to build relationships with investors, he said. With no traveling or in-person meetings, Caplain has seen an increase in time available to spend talking to potential companies.
Delgado echoed the fact that deals could now take much longer, if they happen at all.
“Depending on how long Covid-19 forces us to exercise social distancing, closing deals could be delayed,” he said. “We invest in people, and typically we have needed to meet teams in person before making a final investment decision.”
Despite the hardships that startups are facing, Delgado is optimistic overall.
“For one thing, most of the businesses we invest in are less vulnerable to some of the disruptions we are seeing,” he said. “But also, we invest in resourceful and resilient entrepreneurs because when moments like this come, they shine.”
