On May 21st, I sat down with biotech investors from across Canada to talk about how venture capital is handling COVID-19, and what impact the crisis could have on start-up investment activity. Allyson Tighe, Co-Founder and Investor at Amplitude Ventures; Damian Lamb, Co-Founder and Managing Director of Genesys Capital; and Shermaine Tilley, Managing Partner of CTI Life Science Fund joined me in discussion via webinar, which you can watch here.
Here are my key takeaways:
- Investors are reassessing and refining.
Investors are surveying their portfolios and identifying the trouble spots and risks, reviewing their portfolio planning, and re-assessing where to focus their energy. Most will be scaling back the size of their portfolios and triaging to determine where to spend their time and resources, especially in relation to potential COVID-19 solutions. However, just because you can add a COVID program doesn’t mean you should. Ask yourself – would it be credible? Emergency funding programs and the opportunities that COVID presents can be tempting, but not every technology has a COVID angle or solution to it.
- The best offense is a good defense.
Don’t panic! We’ve been through recessions before and learned from them. There will be damage done to the sector, but start-ups should take advantage of this time. With labs shut down, companies have more time to reach out to KOLs in their space and focus on nailing down a strategy that investors can validate. Investors are going to ask difficult questions. Have a plan in place to ensure your company has the best shot at making its way through this crisis (look at the next 2-3 years), and let your investors know the risks of COVID impacting your company. Keep it simple: Don’t do anything different with your cap table and funding. That’s what is best for a crisis situation. Start-ups should proactively evaluate and mitigate risks. Give your investors updates and show how you are handling the situation successfully. Make sure you can survive this, even if it means putting things off, or trimming things down.
- Work on your investor relationships.
There probably won’t be comfort around face-to-face meetings for a while, and it’s hard to start new relationships over video. Investors are not going to add new companies to their portfolio until they know how bad the economy will get. On the flip slide, look for funds like Amplitude Ventures, who recently raised and are looking to invest in new companies. Otherwise, target people who already know you and your track record of success. Until there is a vaccine, effective drugs and better, more accessible testing, investors will likely move forward at a slower pace. It’s going to take a while to get back to the ‘new normal’ – it took about two years after the 2008 recession. Your deal could be pushed out – timelines are in flux.
We have a number of investment webinars coming up. Be sure to check them out if you’re interested in learning more about how start-ups can adapt to current environment. https://jlabshub.splashthat.com/