Great Companies, Tough Times

There is an adage in VC that great companies are built when the broader economy is terrible.  It’s true because stress brings opportunities.  However, I don’t think that COVID19, the riots and resulting attempt at revolution is a time to be incentivized to build a great company.

I do think there were great companies on the shelf that are finding their footing.

I am invested in a few. Deskpass is one.  Brilliant is another.  Holberg Financial is another.  Catalytic is another.  There are plenty of other companies building businesses that were not hurt by anything.  The winds of change that blew into the atmosphere put wind in their sails.

There were investments made in companies over the past several years before anyone thought of a pandemic which made sense on the trends and fundamentals people were seeing.

• Telehealth
• Digital Education
• Digital Finance and Financial Stress
• Video
• Logistics
• Robotics
• Remote Working
• Cybersecurity for home and remote working

Some new opportunities will avail themselves but I think that existing companies which are in the space and have some traction might take the time to go out and carefully target specific venture capital firms and pitch them given the new environment.  This is not for a seed round, nor is it for a big pivot.  It’s a gasoline on the smoldering fire type round.  It’s also a priced round and not some other instrument.

The companies I am thinking of are probably sub $50MM valuation.  Closer to sub $25MM.  That allows VCs to get in and grab some equity at a good price.  It gives the entrepreneur a chance to take some cash and try and grow fast as we come out of some of the strife.  The entrepreneur might be selling equity at a lower price than they might otherwise want to, but the tradeoff is they can go for the brass ring faster than competitors if they position correctly.

Signing up some carefully targeted VC firms also is a way to eliminate them from investing in competitors.