View from the Bridge
Back to School for Venture Investing? VC in the post-Covid environment – September 2020
The resurgence of Covid-19 across Europe continues to make headlines, but as summer draws to a close and with schools reopening, the UK is doing its best to get back to normal. For those covering the VCT market, it seems like just the other day when RNS feeds were reporting the publication of revised NAVs, and supplementary prospectuses as VCT managers prepared to close fundraising for the 2019/20 tax year. Perhaps it is a side-effect of the lockdown that it seems so recent, but that was back in March and April and we have been living with the effects of Covid-19 for almost six months. With the 2020/21 VCT fundraising season already upon us, in this latest article we outline some of our thoughts, more generally, about venture investments as part of a broader portfolio.
Many comparisons have been made and will likely continue to be made about the difference between the 2008/09 Great Financial Crisis (“GFC”), and the current economic recession. While we will not explore this in detail here, there are a few areas which are particularly relevant for venture investing. For one, the current crisis has been driven by a health pandemic and the resulting impact of lockdowns, social distancing, and the significant behavioural shifts across society. As a result, it presents a completely different set of problems for fiscal and monetary authorities in comparison to the GFC, where recessionary impacts were driven by a liquidity and credit crunch. Perhaps one of the biggest risks to venture investments amidst a crisis is the potential for a slowdown in fundraising, and therefore, difficulty in accessing capital to fund continued growth and development. However, in the current crisis, there has not been any significant withdrawal of liquidity, at least not to the extent seen in 2008/09 (yet!). Rather, there has been a change in consumer behaviour.