The future of investing

As the pandemic evolves into a full-blown recession, startups and businesses are worried about the “big bucks”.

In this webinar, we hosted industry stalwarts Paul Meyers, Coach, mentor and strategic advisor at Stealth Mode Consultancy and Co-founder of Antler, Jussi Salovaara to talk about where VC funding is headed, and the growing role of impact investing and future of investing.

In a nutshell

Meyers said that as a founder-cum-investor, this was his third major economic shakeup. But it is very different from 2008 and 2009.

The good news is that deals are still happening even if not as many as before. VCs have a lot of dry powder so funding will resume. But he also cautioned that companies will continue to fail.

He reiterated that “disruption also creates opportunity. Uber, Slack, and WhatsApp were all started during that period. Disruption creates innovation.”

Salovaara was still a banker during the last recession and he is currently in a “cautiously optimistic” mood when it comes to early-stage startups.

“We have not seen any large scale withdrawal from the market. There is a bit of shell-shock and it is more of a delaying factor, but I feel it will pick up soon. Angel investors naturally being more conservative,” he added.

Key takeaways

The big Limited Partners in VC funds are often financial institutions and don’t have another place to allocate the funds, so rest assured that capital will not disappear. However, it will get conservative.
Everyone has to show a COVID-19 proof business model, a cash management plan. Founders will need to be more sound about ‘how they are going to make money and when, as it will be a major question investors will be asking.
Unit economics and path to profitability are making a big comeback in the post-COVID-19 season in SEA. So maintain solid business fundamentals.
The IPO market will be cooler and slower in the near future. Tech startup IPOs are not so big in SEA anyway. So exits are going to be slow.
But M&As can go up and strategic acquisitions may rise. There will also be increased consolidation in specific verticals. Bigger players who are well funded will make some but it will still be slower than normal.
Holding on to money and being judicious with their spending is a good strategy for an early stage. Once a product-market fit is identified they can consider fundraising.

Also read: Preparing for the future in a fireside chat with Cocoon Capital founders

Team dynamics play an important role in how a company grows. This kind of a situation puts it to test. How they bond together, work together, or not. So hang in there!
COVID-19 is a catalyst and there are opportunities in many verticals. While medtech and e-commerce are the obvious gainers, it is also worth looking for tech-based solutions to everyday chores and activities.
Be cautious not to step into a very popular vertical either, as it will be too crowded. The real opportunity is in less-crowded areas.
Bear in mind that there is no such thing as a local SEA business. Since the region is so diverse, there is no local. The flip side is that you have to respect all the various markets and their needs and cultures.
Business model innovation is critical — it doesn’t require research or scientific discovery.
Use this time is an inflection point to pivot your career. Use this time to also learn and equip yourselves with tools to become a better entrepreneur. There has never been a better time to learn.

Words of wisdom for founders

While VCs are tuning in to virtual meetings and Zoom pitching sessions, leave no stone unturned to get a warm introduction.
Get creative but don’t underestimate the power of cold reach-outs. Everyone likes a nice surprise.
It underlines that you have to have a strong pitch — mechanically and physically. Keep your pitch clear and clean.
There is a lot of information available these days, and make the most of it. Go for walks and listen to podcasts in the ecosystem.
A path to profitability may seem futile as numbers may not be accurate. And sometimes the founder’s assumptions may not be precise, but it matters in the longer run. Its a test of logic and helps avoid mistakes of unrealistic assumptions.
All investors understand it means nothing when it comes to the real numbers game but it’s a good way to assess a founder.

Resources

Meyers recommended the DocSend Pitch metric report that tracks pitch deck interest and engagement for the startup community.
Recommended by our speakers: Audiobook version of VentureDeals
Full video of the webinar session, in case you missed it:

Food for thought

How effective are equity crowdfunding platforms from your experience for early-stage firms?
Meyers was not too keen on tagging the post-pandemic life as the new normal. Do you have a better name?
Do investors still want to see traditional startups?

Call to action

We are hosting a Meet the VC series to get to know the investors in our ecosystem more closely. Join us for a coffee chat with LPs from Qualgro and iGlobe Partners in June.
While funding is an important aspect, startups ought to still communicate and cultivate their customer base. VP of Customer engagement at Tokopedia will be joining us to share his tips on how to keep your customers happy in a post-pandemic world.

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