Investors and startups are in limbo

The past days have evolved dramatically on the investment ecosystem from US, where I am writing this from, as the Coronavirus started to be taken more seriously across the ocean and put almost everything in limbo.

Most investors canceled their trips and started to get meetings online only - but, in spite of what they claim as being business as (un)usual, it is mostly related to deals already sourced and/or existing in the pipeline. No fresh meat, just minimum exposure, obsessive peer talking and twitter checking. It is all about the social distance and staying up to date.

The investment business is about real meetings and building relationships and this process is on hold now until we get to a market status quo and predictibility.

And even though there is a lot of money to be deployed, it will take a while until things will resume to normal as they will get much worse before it will get better.

Probably we will reach to a new normal - if you put away the Twitter/social media chatter (VCs usually are different than what they say and pose online like) and talk to the real people, it is very likely that the way business is done will change and this is just the start of it.

The fundamentals like supply and demand are not that much changed since the end of last year, uncertainty and unexpected developments are what matters.

And, especially since a lot of governmental involvement ($, policy etc) will be in play, a better case scenario looks like a rather short-term situation which will rebound as soon as things get under control.

A worse case scenario, based on modelling or on early evidence of what is happening today in Italy and Spain, indicates that we’re looking to a crisis of enormous proportions.

There are many unknowns and collateral effects and, more importantly, it is way too early to anticipate and plan, situation is pretty much fluid on day-to-day basis.

On the other side, founders already see their revenues affected, both in b2b and in b2c, with a few notable exceptions - video tools, voice and gesture-based software, health sensors/software/businesses etc.

There are already layoffs, uncertainty and an unstable global macro situation. Companies dependent on consumer spending are more affected - they will lose money as consumer attention is already elsewhere. This also applies to second degree players - i.e. b2b2c.

Not least important, if we’re to look for an upside, this is a a very good opportunity for a builder to keep her head down and focus on what is important, as times like these are the best to develop a new company. There’s also a strong case for a spike in the natality rate. And the divorce one too. :D

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