Covid-19: through investors’ eyes

Investors tell us how they’re still on the lookout for promising companies despite the coronavirus outbreak

In the past couple of months, our world and working practices have changed drastically due to the Covid-19 pandemic. Workplaces have scrambled to adapt, and for the most part have done so successfully. But how has the pandemic affected tech investment? With a global recession on the horizon, there have been some worrying stories in the press about the ability of the UK’s tech start-ups to weather the storm. However, this gloomy outlook is not necessarily warranted.

A study carried out by Plexal, a workspace provider, and start-up database Beauhurst found that British start-ups had raised £663m1 since the coronavirus lockdown began in the UK. Looking at funding rounds between March 23 and April 27 2020, the study found that start-ups actually raised 34% more than in the same period last year (although the number of deals done was down).

But even with this positive news, entrepreneurs may be uncertain about the funding opportunities currently available.

Zooming in

Karen McCormick, Chief Investment Officer at transatlantic venture capital investor Beringea, says that the company quickly adapted its entire investment process so that it could be delivered digitally. First meetings are arranged on Zoom, ‘digital site visits’ have taken place, and the company has hosted investment committees remotely. These adaptations mean that Beringea has been able to manage its investment process safely and effectively, looking after the health of its own team as well as that of entrepreneurs.

“We had initial concerns about whether we would truly be able to build our conviction for an investment while not being able to meet the entrepreneurs in person or travel for on-site visits,” says Karen. “So far, however, we do not feel the lack of these traditional interactions has created problems.”

Alessandro Casartelli, Executive Director at GP Bullhound, a technology advisory and investment firm, says that as meeting physically is no longer an option, management teams are spending more time with investors on video, and meeting more team members. “Sometimes we organise sessions without an agenda that are a bit more casual; it really helps to build that rapport and chemistry that is essential for doing a deal.”

He also affirms that it’s very much been business as usual, with the company in the process of making several investments. “Certain businesses – for example those in videoconferencing, e-commerce or marketplaces, among others – have had a boost,” he says. “They’ve accelerated their growth and they’re in a position of strength.”

Still investing

Beringea’s investment has also not slowed down. The fund has co-led a US$29m investment in EDITED, a retail data and analytics platform that works with top-tier names such as Zara, Chloé and Boohoo, to improve their pricing and merchandising decisions. It also led a US$3.75m funding round for Luxury Promise, a resale marketplace that enables consumers to shop sustainably for pre-owned luxury goods. The firm has several more investments in the pipeline, including those that began after the start of lockdown. “Covid-19 has not changed our core investment strategy, but it has carved out interesting niches,” says Karen.

As we continue to rely on remote working and apps, online security and AI solutions will thrive. Karen says that Beringea is increasingly interested in the areas of FinTech, RegTech and cyber security – all sectors the firm focused on before the pandemic, but which it sees as of even greater interest and importance now. In addition, says Karen, people are more concerned about their health and wellbeing, so innovations in how we manage both remotely will be key growth areas.

“We see plenty of opportunities for entrepreneurs, whether they are selling to business or consumers. There are certainly still challenges ahead, but the businesses that can adapt to the new environment will survive and thrive,” she says. She does sound a note of caution, though, saying that companies should carefully consider their ideas and plans and whether they might thrive in the current climate – are they offering a particularly popular service? – or whether it might serve them better to put things on pause for a while during this uncertain time. “In terms of raising from Beringea, it is worth remembering that we are primarily concerned with backing talented entrepreneurs that can build successful teams. It is important that we understand the short-term impacts of Covid-19 on your company, but we are ultimately focused on your skills and expertise.”

Alessandro says that long-term thinking is more important than ever. “It’s really important when you speak with people that you’re very well prepared, not only to answer short-term questions but also on how you’re reacting to this new normal.”

Pitching’s new normal

As to the new norms of pitching, Karen’s main advice is to not be nervous about some of the distractions that can inadvertently pop up in meetings. “We are used to, and comfortable with, kids running across the background, screens freezing up for a minute, slow connections etc. Try not to let these things faze you – they certainly don’t faze us at this point!” She does, however, point to the importance of ensuring that if you choose to use a false background, it isn’t too distracting.

Alessandro says that when pitching, entrepreneurs should be aware that communicating emotion through video can be harder than in person. “It’s important that the presenter pays attention to the body language of those on the call to see if they’re interested, or if they should speed up or slow down. You should take pauses, make sure people ask questions and make it interactive.”

“One thing that probably needs to be different when pitching remotely rather than in person is you must have more than one team member who can answer important questions,” says Karen. “A gap in knowledge can be far more challenging – for example, you will not give a good impression if your finance director has a connection that is too poor to be useful or cuts out, leaving you with no one to cover their areas of expertise. Make sure that you are fully briefed on each other’s slides – it is more work, but it will spare your blushes,” she says.

You can find out more about How to fund your plans for you business in this insight article. 


 

1. https://www.cnbc.com/2020/04/28/coronavirus-uk-start-ups-have-raised-825-million-during-lockdown.html

This article is written for the St James’ Place Entrepreneurs Club newsletter. The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management.