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THE GUILD OF ENTREPRENEURS

How the investment market has changed

The first of our new event series with the Guild of Entrepreneurs kicked off with Stephen Page and Colin Spiller who believe that startups have the potential to be real winners in this new post Covid-19 world. The Startup Funding Club counts over 30% of companies that have actually been booming since March. The first trend that has been widely reported is the boom in e-commerce, whilst tech products can also address many issues created by social distancing measures.

Although the Covid-19 crisis has hit the economy hard, startups have the potential to be real winners in this new world. The digital transformation of the world is being massively accelerated and never before have such drastic changes occurred in such a short timeframe. This creates significant opportunities for small and lean startups that are able to adapt more quickly to new market conditions than larger businesses.

Our belief at SFC is that a new generation of startups will emerge in every industry to take advantage of the new paradigms of a post Covid-19 world. These companies will be able tailor their product to meet the new needs of their customers and to occupy the void left by struggling incumbents. Our job as investors is to fund these innovations now and build a portfolio of companies that will solve tomorrow’s problems.

We see plenty of examples of this already at SFC. We are fortunate to be generalists, which means that our portfolio is not overly exposed to any industry. Out of the 200+ companies that we have invested in, a significant number are operating in sectors that are unaffected or even benefiting from the crisis. We count over 30% of SFC companies that have actually been booming since March, which has had a positive impact on our portfolio overall.

The first trend that has been widely reported is the boom in e-commerce, which is estimated to represent over 30% of all retail transactions currently. A notable example is SFC portfolio company Bloom Magic, an online flower delivery service based in Dublin. As a result of the lockdown, the company’s order volume surged dramatically as supermarkets are no longer giving flowers space on the shelves and many local florists and online competitors had to close. Bloom Magic almost overnight became the number one online seller of flowers in Ireland.

Consumer brands selling “lockdown-friendly” products are also doing very well at the moment, especially if their products are keeping children occupied. Mayku, the brand behind the tabletop forming machines FormBox, has been booming recently and is seeing exceptional levels of sales. We’ve seen similar trends elsewhere in our portfolio such as the home-baking brand Superfood Bakery or Nimble Babies, a company selling plant-based cleaning products which are in high demand currently.

Tech products can also address many issues created by social distancing measures. We’re particularly excited about Sceenic, a software company powering interactive, ‘Watch Together’ viewing experiences which could become the norm of how we consume live events in the near future. Online learning platforms such as Smartella and Langu are also seeing strong growth in usage and revenue. Our portfolio star Cognism, a B2B sales software company, closed an extension of its Series B round in March led by AXA Venture Partners and is well positioned to provide the tools for businesses to generate sales remotely in this new environment. The freelance marketplace CG Hero just raised a new funding round to grow its global pool of CGI talent and match it to relevant jobs, all remotely.

It is also clear that Covid will transform the way we go around. Public transports’ capacity will likely remain low while social distancing is in place and new individual forms of mobility will be encouraged. In this context, Swytch, a manufacturer of battery kits that can turn any bike into an e-bike, has recently done phenomenally well and generated record-breaking pre-orders from all over the world for their latest product. Another interesting trend is around Electric Vehicles which are now the best-selling cars in the UK. This is likely to accelerate further and much more quickly than predicted before Covid. Petalite, an SFC company based in Birmingham, has developed a fast charging battery technology which could be a game-changer for this market. The company raised a funding round in March led by a new strategic industrial investor to bring its technology to market at the end of 2020.

Finally, we are pleased to see so many portfolio companies doing their bit to support the fight against the coronavirus. Transcend Packaging, for example, the manufacturer of sustainable packaging products and producers of McDonald's paper straws, recently announced that it will produce a million face shields a week for the NHS in Wales, with the capacity to increase production to two millions.

Of course, the current events and uncertainty about the future can be very daunting. But seeing all these companies perform and new opportunities arising every day makes us feel optimistic overall and fortunate to be supporting entrepreneurs and innovations that will help us recover from this crisis and adapt to this new world we live in.

1. Since the pandemic, the funding landscape is:

No longer as “founder-friendly"; investors are prioritizing their existing portfolio companies. 

Opportunities still abound for startups in certain sectors, and rescue funding is available (e.g., Future Fund). 

Don't be paralysed by the collective fear. 

Focus on how to communicate urgency: 

Why NOW?

Why you are the best team to bring this to market quickly.

Show clearly how you will make money.

 

2. Online, our VOICE and our SLIDES become much more important. When we pitch online, we:

Lose our face-to-face audience.

Lose the power of eye contact.

Lose the impact our body language has on communicating our message.

Lose the emotion that motivates the investor to take action.

BUT: 

You can build energy by modifying the speed, pitch, and volume of your voice. 

Pay attention to obvious, but crucial details of how you present yourself on video. 

lighting, background, posture, where your eye meets the camera.      

This helps to ensure that you get the best response from your one big shot, and get invited for follow-on meetings.