Friday Letter: VC open for business

VCs are focused on their current portfolio and open to hear pitches. Just don't expect a ton of new deals.

Here’s your covid-19 quote of the week from Daniel Cohen, general partner of Viola Ventures, who told me: “This is a crisis, but the world will prevail.”

Viola conducted a survey of its portfolio companies and what their outlook is in the current era. Spoiler, the outlook is not looking positive. You can read more about it in my story.

But Cohen’s comments come from him having lived and worked through two prior downturns in 2001 and 2008.

I was thinking about his statement. I’ve heard similar comments from other VCs and LPs I’ve reached out to in the last few weeks. Meetings are still being done, entrepreneurs are pitching to VCs and the GPs are reporting to the LPs. Business as usual. It’s just all on video.

Cohen

Cohen also told me: “We’re open for business.”

Definitely, Viola and other firms are spending the majority of their time working with their current portfolios, but start-ups with good ideas and tech solutions for the new work-from-home lifestyle, such as video conferencing and office collaboration, may find VCs open to hear pitches.

Menlo Ventures told me the firm has held its regular investment meetings and have had founders presenting. The only difference is that it’s happening over video.

I’ve also heard of pulled term sheets and investors say they may revisit those deals when the situation eases back to normal in two or three months. VCs tell me that entrepreneurs who have established track records or a history working with the firm will have an easier time securing money for their start-ups in the covid-19 era.

Hirsch

This week, Brian Hirsch, co-founder and managing partner of Tribeca Venture Partners, told me he anticipates seeing increased dealflow, because of all the follow-on rounds that firms will put into their established portfolio companies to support them through the pandemic.

“VCs will want to invest in new companies, but we’re all focusing on our portfolio companies,” Hirsch said. “It’s not about lack of dealflow out there, it’s about bandwidth to handle new deals.”

Deal pricing is attractive for investors

Another VC said his firm is actively looking at new companies and he would not be surprised if they “took advantage of the opportunities out there to go above our budgeted amount this year.”

Jai Das, a managing director and co-founder at Sapphire Ventures, also used the phrase “open for business” when he discussed how the firm is managing the situation.

He said this week that the firm has two term sheets out, one with a new company and one a follow-on financing. He noted that pricing is dropping. Other VCs have also noted that valuations are more rational than they were a couple of months ago.

Das

“For companies that are in the midst of raising right now, there are VCs who will listen to your pitch,” Das said. “No one may invest until things quiet down, but there is activity taking place. We are open for business.”

And that is true for a lot of us.

I would love to hear how covid-19 is impacting you. Is your organization changing the way it conducts business? Share with us at agoldfisher@buyoutsinsider.com.