Investors are bored

Quite a boring period for investors, well reflected by the social chatter and the content produced to get PR attention.

The past 3-6 weeks saw plenty of social media literature with VC advice directed to companies CEOs and telling them what to do in this crisis. Pointers to some of it are in my weekly emails. While repetitive and occasionally good, most of it is a mean to an end, representing general prescriptions related, more or less, to further get to financing options. (i.e. raising the next round). It is understandable, providing money is investors’ main competence after all - securing funding is however only one thing that people running startups have on their plate.

There are two types of startups under the investors’ radar nowadays:

1. Startups in need of financing now, because of the due cycle need, and which will likely need to make a 10x more compelling case than usual for being considered. The unlucky ones will take bad deals, becoming un-investable in the future, but at least saving the ship in the short run. Or, unlucky to the extreme - they will die.

2. Startups that still have a 6-12+ runway and need to be creative and figure out a reasonable plan under the new circumstances - either a reset or a re-optimization towards the end goals. This shows great mgmt skills, more to be appreciated than the growth perspectives, which, once the crisis is over, can be planned and taken care of.

But those discussions are not fun for investors. This is defensive, not offensive, they are worried as they need to do damage control and at least preserve the value of their portfolio. And their job is not preserving - on the contrary, it is to make money when things are dandy and growing: buy when it’s X, sell it when it is 5-10X+. It’s that simple, being in the “save the titanic” mode is not the usual modus operandi.

The pre-Covid market was full of fresh powder and the general consensus was that there was more money than projects. Now that the situation is as is, not only that there’s fewer opportunities to invest in, but also the heat of risk taking in uncharted territory is simply not worth it for most of them.

Make no mistakes, everybody has the eyes on the prize and is looking for that informational advantage that they can readily jump on. If that. And actually, if we look at the numbers, there’s still some investment activity, which is mostly residual work accrued and finished these days.

But it’s not a fun period for investors, that is for sure.

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