Review 2020: 7 key lessons early-stage startup investors learnt during the pandemic year
December 8, 2020 12:23 PM
The need for being sector agnostic is what most early-stage investors realised. All those who had a wide range of sectors in their portfolio were able to perform better instead of those who had startups from a specific sector.
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The year 2020 has been the most unprecedented year for everyone right from individuals, businesses (big and small), startups, markets, and investors. The deadly Covid-19 virus, which originated in late 2019, started showing its wrath in 2020 bringing in the worst ever socio-economic crisis of the century. People lost lives and jobs, several businesses had to shut shops, and markets were in the doldrums. The investor community that helps businesses with finance and strategy was in a state of ambiguity and was very cautious of their next step forward. Some of the top early-stage investors who had put their bets on segments such as travel and hospitality witnessed their investments erode and took steps to tackle the situation.
Here are some learnings that early-stage investors garnered in the year 2020, which is also the year of the most severe global pandemic:
Brainstorming during a time of crisis is important. Most of the genuine early-stage investors immediately called up their portfolio companies when the news about the crisis broke out. As per these investors, it is key to have a conversation with the portfolio startups and understand their situation and help them with the next steps so that business continuity is not impacted.
Need for being sector agnostic is what most early-stage investors realised. All those who had a wide range of sectors in their portfolio were able to perform better instead of those who had startups from a specific sector. For example, those who had their investments only in hospitality or travel had to bear the brunt.
Knowing the business in and out is key. As an investor, it is key to understand the nature of a business in and out. Your job is not only to pump in money but also to ensure that the money is multiplied and that is only possible if the investee company is performing well. If you, as an investor, understand the business well then you would also be able to help it maneuver during a time of crisis.
Digitization is crucial as it is the way forward and every business, small, medium, or large, has to adapt and adopt to technology in a bid to not only survive crisis like the Covid-19 pandemic, where physical distancing became the new normal but also to improve productivity. With pandemic like Covid-19, businesses got disrupted like never before. New technologies such as AI, ML, data visualisation, RPA are needed to automate mechanical/semi-mechanical jobs.
Closing deals remotely is also possible now. There was a time when investors, especially the early-stage ones, had to conduct several rounds of face to face meetings with the startup founders before investing in a company. However, 2020 has made everyone realise that remote working is as effective. Many early-stage investors have been able to make record deals this year and also raised record capital through Zoom and Google Meets. 2020 has created a new workforce management system with a different working experience
Think global, work global is the new normal as for many investors who had issues raising capital from LPs sitting abroad, 2020 was a blessing in disguise. With the pandemic, the world has also shrunk as remote working has become the new way of doing business.
Healthtech, e-commerce, and fintech emerged as the top and most lucrative segments for investors in 2020 for reasons well-known. These segments fall under essential services and have continued to stay unimpacted by the various lockdowns imposed by the governments worldwide.
Dr Apoorva Ranjan Sharma is the Co-founder and Managing Director of 9Unicorns. Views expressed are the author’s own.