Written by Craig Ryder
Originally published on 'Tectonic', Oct 2020
Despite economic depression being one of the sad realities of the pandemic, people are continuing to raise investment and start up. So we caught up with Francesco Perticarari to find out how to raise investment in pandemic.
How to raise investment in a pandemic?
If 2020 was earmarked to be your year—whether that was a new investment round, starting up that side hustle or landing a new job—there’s a high chance that those plans have not only been scuppered, but jettisoned altogether.
Nevertheless, startups and investors are still making moves.
In August 2020, SeedLegals reported that, “HealthTech and EdTech investments have surged whereas Food-based start-ups are struggling”, displaying the “pragmatism” of investors as they react to the global health pandemic, the transition to remote learning, and the downturn in hospitality.
Presumably, if investors are throwing cash at “risky'“ AR, you could say, they’re feeling a lot more stable, and possibly subscribing to the school of thought that sees economic downturns as times to be bold. But to find out more about how VC funds are managing their portfolio’s we invited Francesco Perticarari from Silicon Roundabout Ventures, for a chat…
Hey Francesco, let’s start slowly… What exactly is a VC Fund?
A VC fund is a financial vehicle where investors pool money into with the objective of acquiring equity in unlisted companies. The fund is managed by one or more individuals (called general partners - that’s me) who recruit and ask investors to commit cash. Then we decide how and when the funds are deployed.
How has raising a VC fund changed during the pandemic?
COVID:19 has had a massive impact because, generally, most investors only want to invest after they've met you in person several times. So in April our fundraise came to a sudden halt. But the market has restarted pretty quickly and many investors are becoming comfortable building a relationship via video call.
So how is the Silicon Roundabout Ventures fund looking now?
Today we've resumed the pace and are gaining momentum with top-tier investors like the British Business Bank, Family Offices, and even one large VC fund looking to join us.
If we don't get another hard and extended lockdown, we should be able to find enough interested investors to allocate the remaining tickets for our £40m launch target by Q1 2021.
That’s good to hear. Your VC fund is specifically for DeepTech. What is DeepTech and why is this the focus?
Deep Tech is actually one of those nonsense words like AI that doesn't really mean anything! For most people Deep Tech is a startup that is based on substantial breakthroughs in science or engineering, often in sectors that are by nature very experimental, like quantum computing or bio-tech.
For us, that is certainly Deep Tech, but our definition is broader. We are not so fussed about the sector as long as we can see a strong and truly innovative IP behind the strengths and competitive advantages of a given startup. So, for us, a Fintech or an AdTech or a Cybersecurity company can be Deep Tech as long as their value proposition is based on tech innovation that is truly proprietary and represents a truly strong and defensible competitive advantage.
Wow, sounds like you’ve redefined the term.
Yes, we’ve basically adopted the term to tell our investors and startups that we will not invest in anything run-of-the-mill, like e-commerce that's built on shopify or a platform that connects users via a simple database and uses third party or open source algorithms.
Got it. Has COVID changed the way investors are looking to invest? What sectors/industries are expected to grow?
Actually, it hasn’t, really. COVID:19 has sped up certain trends like remote work but that was happening already. And in truth, even if COVID has had a terrible effect on sectors like hospitality, VC investors tend to invest with a 5-12 years mindset, therefore not even travel or hospitality are ruled out because they will come back.
But in general any serious VC investor would probably do two things differently today than before the pandemic:
1) expect a longer runway eg: 16-18 months rather than 6-12
2) conduct their due diligence in a way that makes them comfortable to invest even if they can't meet the founders in person
That’s solid information. Any final thoughts for potential investors for startups out there?
This is the time to be bold.
In order to launch our fund I had to crunch through a lot of data on the European ecosystem. We monitor its development and know its roots and development. Based on all this data we've collected and analysed we have more unicorns than ever and there is more money than ever. And with the founder of Spotify, Daniel Ek, committing to invest € 1 BILLION in deeptech projects over the next ten years, there are a million reasons to be optimistic.
Amazing, thanks Francesco.
Investment in a Pandemic: The Tectonic View
Investment rounds should start close to home so contact your existing investor network to top up on investments. If they have “skin in the game” it's likely they will want you to survive.
Don’t expect to close your fundraise with one bulk investment, so diversify, and target close smaller rounds and close them faster.
Update your deck to show how you managed the pandemic. What fiscal changes did you make to ensure you outlasted the rest? Innovative processes will go down well with investors wary of future lockdowns.
If you’d like to hear more from Francesco he recently appeared on the Everyday Startups podcast with Tectonic's Dan and Nana Parry.