(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. We start the series with the first response which was provided by Ken Woody, President and Partner at Innova Memphis. Additional articles follow over the next several days with responses from Tony Lettich, Managing Director of The Angel Roundtable; Eric Dobson, Chief Executive Officer of Angel Capital Group; and Grady Vanderhoofven, President and Chief Executive Officer of Three Roots Capital.)
- 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? Before we consider ANY new deals, we are evaluating all our current portfolio companies. Innova has done deep dive reviews with all our companies asking them to review customer demand and projected changes in demand, supply chain potential changes, impact of international ordering or sales on business, cash runway, employee needs, SBA loan evaluation, and ability to pivot into critical COVID needs rapidly. Once we have satisfied ourselves, we have done the best we can for our current businesses and we have set aside enough reserves to cover potential needs, we then evaluate new opportunities. They basically get the same questions. Investing is just more risky right now. One of the biggest risks is counting on other investors, particularly angels. Most of them have seen major hits to their portfolios, so will they really come through on that commitment to invest in this new company? Many times, we’re seeing the answer is “no,” which makes it even riskier for our investment.
- How has the COVID-19 issue impacted your operation? I’m assuming that tools like Zoom, etc., have become your friend. Innova has personnel in multiple offices, so we have been using Zoom, Google Hangout, Trello and others for years. We continue to use that now since we have shut down all face to face meetings.
- From the perspective of your portfolio companies as a group, what sort of impacts are you seeing on their operations? Business is changing day-to-day. We have companies that see steady growth one day, then a 50 percent drop the very next day. Lots of volatility.
- What, if any, advice would you offer entrepreneurs right now? Do the Deep Dive review I suggested in the first answer. Conserve every bit of cash you can now. Plan for this lasting longer than the experts say and for the economy to come back slower than expected. Take care of yourselves and your employees. Be Patient.