COVID-19: How We'll Be Working And Why
Creating new ways of working and new processes in the midst of a crisis can be challenging. Standard playbooks may no longer apply, and many of us are faced with a brand new set of challenges over and above the usual complexities of business and everyday life.
Throughout this difficult time, we’ve been warmed and inspired by the way our team and the wider startup community have banded together to share insights, resources, and support.
We began making internal changes and communicating with our portfolio on the 27th of February and since then have introduced 12 new initiatives and processes, 2 of which have already become redundant with the rapid pace of change we’re seeing. Data, action and communication are the three key ingredients that have driven our response to the crisis, and we would encourage all founders if they are not already, to be guided by a similar recipe.
Being decisive in uncertainty means making informed decisions early and often, communicating them in real-time, and continually reviewing them as new data comes to light.
With the current high levels of uncertainty, the informed decisions that you do take might be to hold off on making any big changes until the situation becomes more stable, and this is in fact something we’ve recommended to our portfolio founders on numerous occasions.
In this spirit, and as a follow up to our last memo, we’ll share the latest data we’ve collected on:
- The impact COVID-19 has had on our portfolio startups,
- The evolving investor sentiment within early-stage venture funds
and how we’re adjusting as a result. This data is fully anonymised and was gathered through email conversations and surveys conducted throughout March 2020 from 40 of our portfolio companies and 11 early-stage (pre-seed through to series B) investors.
How early-stage investors and startups have been affected
Investors are doing less deals, at lower valuations, and reserving capital to support their portfolio
- 45% of investors expect to see a 50-75% reduction in the number of deals they do in the short-term (0-6 months).
- 100% of investors expect C-19 will impact valuations on deals they invest in this year, with 54% predicting a 30-50% reduction, and 46% predicting a 15-30% reduction.
- However, 54% of investors expect to return to normal within the medium term (6-18 months).
- And 90% of investors are anticipating doing bridge rounds for at least 10% of their portfolio, with 27% looking to do bridge rounds for up to, or more than half of their portfolio.
Investors have also noted that new investments made during this crisis period must have significant runways with the round (2.5 years+), that they will be looking for significantly more proof points, and that they will be doubling down on their key themes.
All of our portfolio companies have seen their revenues impacted by the crisis, and those who have been affected negatively are considering redundancies.
- 70% of our portfolio have seen their revenues negatively impacted, however 30% have seen their revenues go up since the crisis hit - some substantially so.
- 65% of our portfolio are considering redundancies, and 47% have taken the decision to make cuts.
- 20% of our portfolio founders believe that they have had, or currently have mild cases of COVID-19.
How we’re impacted by this
Setting an abnormally high bar
The rapid pace of change we're seeing means that the risk from any investment is much higher than normal. In order to maintain our normal risk-reward balance and remain consistent with our core investment thesis, we’ll be setting an abnormally high bar for any new investments. At a time when not even the next 3-6 months can be easily predicted, and consumers and businesses alike are in survival mode, realistically there are very few pre-seed startups that will successfully be able to launch and find product-market fit in today’s climate.
But, we’re optimistic that there could be some...and stand by our decision to stay open for business and keep reviewing new deals. We're particularly interested in hearing from startups that are working on COVID-19 related solutions for our Founders Programme which kicks off in April.
FP impact: Now, more than ever, it’s important for pre-seed founders to be rigorous and creative in their approach to validating that there will be demand for their product. Whilst it’s natural that you’ll be yet to generate revenue (and we’re OK with this - we invest from day 1), we’ll want to see high quality research or early tests/customer development work that act as clear indicators that the market wants what you’re creating.
Full transparency within 7 days
Being open for business means we’re committed to learning about new opportunities and taking first meetings with as many startups that excite us, but due to our sky-high bar, very few, if any, startups will progress any further than that in our pipeline. It’s a tough time to be a founder, and the last thing we want to do is add to what is already an incredibly uncertain time for you - we hope being up front with this is helpful for your planning.
FP impact: After our first meeting, we’ll work to give you specific feedback within 7 days on whether it’s a pass, or what further research we’ll need to do to make a decision.
Championing our portfolio with our time and capital
Our no.1 priority is supporting our existing portfolio companies. From our inception, we’ve believed that Forward Partners is in the entrepreneur services business. We exist to empower founders with what they need to lead and succeed, and it may be considered a radical position to some, but we work for our entrepreneurs. As the data shows, these are tough times for our founders, and we're dedicated to putting all hands on deck to help them weather the storm.
FP impact: We’ll be testing a number of new initiatives to better support our portfolio, from email digests to masterclasses, and there is a possibility that we’ll extend these to the wider ecosystem.
Doing our bit: Coaching from the sidelines
I’m incredibly aware of how much simpler it is for us, and other members of the investment community, to share their advice on the crisis, but how much more difficult it is for you to lead your startup through it. We’re not the ones in the arena, fighting every day to push your company and your team forward - you are. However, we endeavour to be the coach on the sidelines - supporting and guiding our current and future founders, and providing you with the tools you need to keep fighting.
I hope that being transparent about what we’ve seen in the ecosystem, and how we’re adjusting our processes helps aid your decision-making. Here are a few things we’re opening up to the founder community to support during this time. We endeavour to add to this list, so check back regularly. We’re open to your feedback on how we can do more, so email me on email@example.com with any suggestions.
FP Studio is open for all
Our studio team operates on a not-for-profit basis, and up until now have been 100% dedicated to our portfolio companies. However, given recent events, we would like to open the doors to help other companies in need of support over the coming months. This would be on the same not-for-profit basis as we offer our companies, meaning we still charge for our service, however all rates are calculated on a break-even basis.
For further information, please contact firstname.lastname@example.org.
C-19 Strategy Clinics - April 16th
In a special adaptation of Office Hours, we’ll be offering x6 startups the opportunity to sit down with FP investors for 20 minutes to get startup advice on how best to navigate the COVID crisis. Flipping the script on our usual format, instead of pitching to them, you’ll have the chance to lean on their expertise to sense-check or get unstuck on your strategic approach to surviving the crisis. You can apply for a slot here.
Founders Programme C-19 slot
Our virtual Founders Programme kicks off next week, and we're saving 1 slot for a COVID-19 related business idea or for an applicant who works or volunteers for the NHS. The deadline for applications is on April 1st, but this slot will remain available until April 17th. The course will have started by then, but we'll assist you to catch up. To apply, click here.
Koru Kids Nanny Service
This one’s not from us, but from our inspiring portfolio company Koru Kids. They have pulled together a work-from-home nanny service in record time that sends a nanny (the same one each day) to parents’ home to look after children whilst the parents are also there.
Koru Kids nannies are trained, vetted, and they take care of all the contracts, payroll and payments, and wherever possible, we will match parents and nannies within walking distance, avoiding public transport. They also have 3 trained teachers on staff who are rapidly developing a programme of support including daily activity ideas, a vibrant nanny community sharing ideas, weekly Koru Kids topic themes, and 1:1 support to nannies if they need it.
Stay safe everyone.