innovation & funding in times of crisis...•innovation in emerging sectors is thriving and...

INNOVATION & FUNDING IN TIMES OF CRISIS

WHY THE BEST TIME TO GROW IS NOW

Insight from Andrew Hughes, Entrepreneur & Investor

POSITIVITY Let’s start with that mindset

INNOVATION: IMPACT FOR SOCIAL GOOD

The pandemic is sending shock waves

throughout the business world

But there are a seismic shifts for the

better of our communities, an approach

that must continue

Significant increase in Social Impact

outlook and taking Responsibility

SOCIAL IMPACT &

RESPONSIBILITY

• Prioritizing doing good over profit

• Captains of industry leveraging their

strengths to aid the current situation

• Companies pivoting all over the world to

help others

• Employers are looking after their employees

whether they are working or not

• This is the societal innovation long overdue

INNOVATION Opportunity is coming

IF NECESSITY IS THE MOTHER OF ALL INVENTION

Here’s a thought…

Is this the moment in history

we witness

the end of cash?

Innovation arises from defining moments

SO WHAT IS GOING

ON?

• Innovation is born of necessity

• Technology doesn’t stop evolving in a

crisis - in fact it accelerates

• As economies get upended, certain

markets open up and grow

• Blockchain, IOT, AI and Data

Research, Robotics and other

technologies are critical solutions now

SO WHAT IS GOING

ON?

• Beyond the immediate crisis, it is possible to

see a continuation of the conditions that

have served the start-up world so well

• Monetary authorities will keep capital

cheap and plentiful

• In a world desperate for growth, investors

will be dependent on finding the next

promising start-up unicorn

SO WHAT’S GOING ON

IN SPAIN?

• Over 1.000 Spanish start-ups have joined

the #STOPCORONA movement to use

technology and data to fight COVID-19

• #VENCEALVIRUS #THECUBE Madrid with

hackathon 6000 people to help society

during and post crisis

• GBO member spearheading crowd funding

for ventilators Spain with 80+ delivered

WHAT’S NOT

GOING ON!

INNOVATE NOW

WHY ENTREPRENEURS

MATTER

Start-ups are the #1 Engine

for job creation in modern economies

ENTREPRENEURSFOCUS

• This is an unprecedented time, and all are being

impacted, some more severely than others

• As a business owner, your customers and their trust

are paramount

• You need to be willing to sacrifice short term profit

gains to protect your customer

• Protect your employees

• The founders of some of today's largest companies

did exactly this in the last financial crisis

LET’S THRIVE

• Innovation in emerging sectors is thriving and

providing opportunity in this crisis

• Entrepreneurs thrive and drive recovery in

every crisis:1890’s,1930’s, 1970’s Oil,

1990’s, Dot.com, 2008 and now

• New and young firms are the main net job

creators in the economy, and this is especially

true during recessions - older firms are net

job destroyers

• Countless investments are still being made

• On 3rd April Insight Partners announced a

massive $9.5 billion growth equity fund

COMPANIES STARTED IN THE LAST CRISIS

• Airbnb 2008, $31B

• WhatsApp2009, Bought by FB$19B

• Instagram 2010, Bought by FB $1B

• Uber 2009, $47B

• Pinterest 2010, $8.6 B

• Slack 2009, $15.9 B

• Square 2009, $23 B

• Stripe 2010, $50 B

• Groupon 2008, - $1B

• Abzorba Games, 2011, acquired 2015!

ADVANTAGES TO START-UPS

NOW VS 2008?

• Abundance of cheap government money

• VC money still available for proven tech

• Tech is still a massively attractive investment

• Success have proven the tech value over time

• Tech barriers-to-entry are lower and cheaper

• Cloud vs server infrastructure

• Diverse seam of skilled and remote talent pool

• Multiple distribution channel options

• New models such as SaaS, subscriptions

• Crowd-funding options

2 APRIL 2020

“During and post crisis Tech

companies that sell to

businesses should be able to

count on more dependable

revenues, particularly given a

shift from transactional sales

to subscriptions with the rise

of cloud computing”

INNOVATION, INVESTMENT & GROWTH NOW

Healthcare eLearning Social ImpactChildren’s Content

Remote

Pharmaceuticals Bio Technology Food Delivery eSports Gaming

Blockchain Electric VehiclesInsight & Research

AI & Deep Tech Cyber Security

VC INVESTMENTLET’S THRIVE

INSIGHT

Northzone EU, Hoxton Ventures London, HV Holtzbrinck Ventures Berlin, Kibo Ventures Madrid, Mundi Ventures Madrid

• Investors are still investing but expect them to take longer than usual and probably lower valuations

• Companies with enough runway have an incredible opportunity to emerge stronger

• Seek capital efficient companies

• Many companies will be able to become EBITDA positive, providing revenues are not extremely exposed

• M&A continues and will continue, albeit with impact on valuation

• Keep developing, keep lean and smart pivots now could impress investors later

Source: 2020 Start-up Genome LLC. |

NOT ALL GOOD NEWS!

• Chinese VC deals have contracted c55% in first two months

• If that happens globally c$28 billion in start-up investment will go missing in 2020

• Last recession total drop in VC investments was 29% over 12 months – equivalent to

$86.4 billion in 2020

• It took global VC investments 3 years to recover

• US Tech IPOs dropped by 90% following last recession, and has not recovered to

pre-Recession levels, with the number of IPOs in 2019 (34) being 55.3 percent lower

than in 2007 (76)

• Some VCs using the pandemic to rip up term sheets, force extreme rewrites or

slash valuations - post signature

Source: 2020 Start-up Genome LLC. |

DO IT NOW!

• Need for net new jobs means the economy needs start-ups now

• During past 2 recessions, fewer dollars invested but more companies funded

• Over half the Fortune 500 companies created during recession or bear market

• Over 50 tech unicorns valued at $145.2 billion founded during last recession

• Governments helping founders

• Denmark covering 75% of salaries for companies that do not cut staff,

Germany is offering to cover 60% of the new salaries for employees reduced

from full to part-time, UK to follow with ‘Runway Fund’

SUMMARY• It’s dire, we all can see that

• The world is turning to help each other like no

other time in history

• It’s going to get worse before it gets better

• But growth is all around us

• New opportunities are abundant

• Success comes from within

• We are in for the long haul - together

“Success is a little like wrestling a

gorilla.

You don’t quit when you’re tiered, you

quit when the gorilla is”.

- Robert Strauss