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April 06, 2020 | Tom Ballard

Eric Dobson predicts investors will probably go to the sidelines initially

(EDITOR’S NOTE: We contacted several of the angel and venture investors in the region to get their thoughts on how the COVID-19 pandemic is impacting their activities and their portfolio companies. Previous articles in the series reflected the thoughts of  Ken Woody, President and Partner at Innova Memphis {click here} and Tony Lettich, Managing Director of The Angel Roundtable {click here}. Today, we hear from Eric Dobson, Chief Executive Officer of Angel Capital Group.)

When we caught-up with Dobson recently, he had just returned from several weeks of international travel and offered some context, noting he was “on lockdown in my basement living with the cat and longing for personal interaction again!”

  • How has the COVID-19 pandemic and the corresponding turbulence in financial markets changed the angel and venture world in general, particularly as it relates to new deals? The two markets are largely uncoupled, but this is an unprecedented event. Where new resources go comes down to where investors perceive they can make the best bets in the short run. My best guess is investors will go to the sidelines initially to see how the stimulus package will be implemented, and then likely put new capital into the stock market if they perceive a stock rally. Angel and venture investing will be decreased, likely significantly, not stopped. Preservation of worthy portfolio companies will not stop. But, this will likely be an excuse to allow any struggling portfolio companies die for a tax loss in 2020.
  • How has the COVID-19 issue impacted your operation? I’m assuming that tools like Zoom, etc., have become your friend. I am polling my investors as we speak to take a temperature on the next 90 days. It is most likely we will continue to work on deals already in our pipeline and virtually. But, it is unlikely we will be seeking new deals for Q2.
  • From the perspective of your portfolio companies as a group, what sort of impacts are you seeing on their operations? Companies should immediately stop spending any non-mission critical cash. The market for second rounds will be weak for the immediate future. Companies should preserve cash now, make hard calls on non-mission critical staff, and ration mission critical staff to survive for at least six months. If we all observe a smart distancing program, the wave should crash and be done relatively quickly as we have seen in China. However, if we reopen too fast, we can bring about the very thing we fear the most – an overwhelmed healthcare system that is already heavily strained. FOLLOW THE DATA, not the politics of the situation.
  • What, if any, advice would you offer entrepreneurs right now? Take a serious look at your resources and determine which are mission critical. Make use of virtual tools for business. Preserve cash. Focus on developing marketing content you always wanted to create, but did not have the time to do so in anticipation of the recovery. Pray it does not reemerge in the fall “flu” season and extend this economic hemorrhage through the balance of 2020 into 2021

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