COVID-19 Webinar Part 1: our panellists discuss the changes they’ve seen since the beginning of the pandemic in the UK and how businesses are reacting

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UK Business Angels Association

23 April 2020

Paul Tselentis, Matthew Jones and Chris Trotter

During these unprecedented times, we’re doing everything we can to offer support and advice to our members and the wider community.

Last week we held a webinar where panellists Paul Tselentis (24Haymarket), Matthew Jones (Anthemis) and Chris Trotter (Clarendon) joined UKBAA Managing Director Rod Beer to share their insights and observations on how the industry has been affected since the COVID-19 pandemic put much of the world on lockdown.

In the first part of our series the panellists discuss what their respective companies have been doing over the past few weeks and talk about the pivots they’ve seen companies in their portfolio make in order to survive.

Paul kicked off the discussion highlighting that it was the supply side that was first hit by the pandemic followed by the demand side since the lockdown was implemented. He comments:

“What you’ve seen evolving over the last couple of weeks a continued decay of the demand side, stretching from the consumer economy and leisure economy, through into other areas such as enterprise facing companies as they’re starting to find their clients in turn more challenged. It’s a gradual thing. The next phase that many of these companies are entering into is the gradual slowing of liquidity and investment capital to support them through this period. That is only starting to be felt and as the summer and autumn continues, in our view, it’s going to become, a deeper and deeper issue.”

At Anthemis, they are continuing to invest but they’ve seen founders becoming more conscious of their burn while investors are returning to longer term thinking. Matthew says:

“I think we’re back to thinking about how we build sustainable businesses and addressing actual problems. Over the last couple of years, we’ve moved a little bit away from that core kind of opportunity. It’s been pleasing to see, at least some of, our companies coming back to their original mission and thinking about why they got up and running in the first place.”

“There is definitely a reduced focus on new investments and a focus on their existing portfolio companies, and a triaging process to find out who needed cash and when did they need it?”

For Chris at Clarendon Fund Manager, it’s the slowdown in investor activity that he’s noticed. As angel investors have had to assess their personal situations and new investments have largely been put on hold.

“There is definitely a reduced focus on new investments and a focus on their existing portfolio companies, and a triaging process to find out who needed cash and when did they need it? We’re beginning to see investors look at new opportunities now but there’s definitely a focus on sustainable business models and less of a focus on when’s the next round and how much money is coming in over six months or 12 months. For a co-fund it’s busier for us than ever. There’s more demand than ever for co-investment, especially for companies that have a cash need, but maybe can’t get new investors to consider it. We’re trying to go in where there’s a funding gap.”

Due to the way that the COVID-19 pandemic has changed our lives, businesses are having to reassess the way they work in order to adapt and survive. While many businesses have had to grind to a halt, others are turning to new ideas. Talking about one of the companies in his portfolio, Chris shares:

“We’ve had a couple of companies who are gin distilleries, and they’ve started making hand sanitiser. We’ve seen a lot of companies do a little bit of consulting work just to generate cash in this period. That’s a challenge for companies that have a really long-term focus, who were dependent on further fundraising. They’re having to redeploy some other staff to do non-core consulting type work just to bring a bit of cash in.”

Like Chris, Matthew has noticed some interesting pivots with his portfolio companies too. He explains:

“That first week I remember was pretty crazy with people trying to take their business in all sorts of different directions. To a certain extent, I think throwing things at the wall and just seeing what sticks. Now people are at home, a little bit settled, homeschooling children and things like that, people are now taking a breath and thinking about going back to that longer-term thinking.”

In his portfolio, Paul has noticed that early stage businesses are more agile and able to adapt during these difficult times.

“I think one of the beauties of young early stage companies versus larger, admittedly, more well capitalised businesses, is that they can be more agile in this environment. While liquidity and cash runway is an obvious disadvantage, many of our companies and our CEOs been pretty agile to adjusting. I think there’s great opportunities out there for young companies to adjust and take advantage of this if they can. Number one, solve their liquidity challenges, but number two, also just have the right leaders in there who will look at this whole mess as an opportunity rather than challenge.”

Our series continues with part 2 tomorrow where our panellists talk about managing their portfolio through the pandemic and share their thoughts on the government’s support schemes.

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