Kyle Lui, a partner with DCM Ventures, calls the current market environment a “tale of two cities.” He says that some of his portfolio companies are accelerating during the covid-19 pandemic, while his other investments are experiencing significant headwinds.
Venture Capital Journal recently spoke with Lui about his portfolio, which ranges from consumer-facing brands Lime, Eaze and Hims, to enterprise startups DocSend and TravelBank. An edited transcript of the conversation follows:
How have you worked with your companies since the covid-19 crisis started?
When the pandemic first erupted, we did a deep study of our portfolio, classifying companies into red, yellow and green categories. Companies colored red had significant risks. Since then, we saw some of our companies get reclassified from red to yellow and later to green.
What’s an example of a company that saw this rebound?
Shift, an online marketplace for used cars, had a steep drop off initially. People were just staying at home. The company had a round of layoffs and salary reductions. They took a PPP loan. But by late April the market picked up significantly. People figured they would rather drive in their own cars then be exposed to the virus on public transportation.
Last month we saw a very successful IPO of Vroom, another company in this space. Shift is now too planning to go public in a reverse merger with a SPAC.
Speaking of transportation, I suppose people now have less need for e-scooters. What is going on with your portfolio company Lime?
Lime was supposed to be profitable this year, but then covid-19 happened. The company has rebounded significantly since March. Sales are now at 70 to 80 percent of what the company was making at this time last year.
What distinguishes Lime from Bird is that 60 percent of its sales are coming from Europe, which is entirely open now. In fact, Lime is now profitable in the vast majority of cities where it operates. People are now riding for longer. Rather than using a Lime for the last mile to get to work, people take it to the park or use it to ride around the city.
Although Uber’s round in May was dilutive to the company, I am excited for Lime’s prospects over the long-term.
[Editor’s note: Uber’s $170 million investment was done at a $510 million valuation, a stepdown of 79 percent from Lime’s April 2019 valuation of $2.4 billion, according to reports.]
What about companies that are still experiencing significant headwinds in this environment?
Our investment in Stockwell, a smart vending machine company, shut down this month.
TravelBank, which is a business travel and expense management platform has lost business because people are obviously not traveling now. If it were not for a PPP loan, they would have to do a much deeper round of staff cuts.
The company is now doubling down on expense management and is finding itself more competitive in this product line.
Did you guide your portfolio companies on the PPP process?
We had a board meeting with each company about PPP. Our guideline recommendation was that companies that had less than six months of cash left should have applied for the loan.
A lot has changed since before the pandemic. What themes do you find exciting now?
I think there are interesting opportunities around video conferencing. There are various tools that could be used to enhance our experience with Zoom’s platform.
Another exciting theme is remote patient monitoring. Doctors and patients really embraced telemedicine and it looks like there is no going back. Remote patient monitoring goes beyond a telemedicine visit. Valuable biometric data that is remotely read by a doctor could be built on top of existing platforms, such as an Apple Watch.