FoundersX discusses coronavirus response, work-life shifts and views toward the future

Our Sponsors June 22, 2020

Helen Liang from FoundersX sat down with BASES to examine impacts of COVID-19 to investment and startup strategy, as well as broader changes. FoundersX, one of BASES’s sponsors, is a venture capital firm based in Menlo Park investing in the next wave of deep-tech unicorns in enterprise AI and big data, quantum computing, FinTech, and other industries.

How has FoundersX had to adapt to COVID-19?

It has definitely been an interesting time for all of our team. We changed all the in-person meetings to Zoom meetings, including our own team meeting with startups. We don't see big challenges. Of course, it's a lot tougher for the trust building. Without meeting a startup founder in person— only talking on Zoom, we would be more cautions in making an investment decision. Ideally, you want to meet the founder in-person before you make the investment decision, but right now you just have to run more due diligence analysis, doing more Zoom calls and more reference checking.

How have your startups been faring amidst the crisis?

Actually, we are surprised to see them being so resilient. The startups have gone beyond our expectations. Within this time period, three of our companies were in discussion for acquisition. Two of them actually closed the deals last month, and another one still in consideration. So, we have definitely seen the business still growing, and venture investments are still very active. Of course, most investors are probably becoming a bit more conservative in allocating capital right now. And, a lot of founders will be more conservative in cash preservation as well. Hiring plans might be put on hold. But overall, we still see great resilience in the startups we have invested in. When we get portfolio updates, we still see solid gross revenue growth.

It could have been worse. We feel grateful for the turnout of our portfolio companies . We haven't seen anyone really struggling. We’ve a few companies which have given us pleasant surprises instead. So it has been very encouraging. One thing to have in mind is that , one month revenue hit might be a big deal for large companies because they are more operation driven. But for tech startups, the time span is a little bit different. You might not see a huge shift in one month, but if it lasts for three to six months, the startups will start to see more significant impact.

Do you foresee any lasting changes made to the structure of how business is done because of COVID-related shifts?

Yes. We're definitely going to see less travel, more online meetings and work-from-home mode. Some business might be permanently working from home. I believe companies will start to review their travel plans more. A lot of business travels might not be necessary. And many of the conferences can go online as well. So, how we work will definitely be forever changed.

This crisis will also force a lot of startup founders to think whether their company has a mechanism to deal with crisis. In a sense, it will force startup founders to think harder about what to do when you face a crisis like COVID-19.  Especially for hardware startups, such as AI chip or robotics company. When suddenly your global supply chain is going to be impacted and you can’t run lab experiments with teammates, what do you do?

How have you shifted your investment strategy because of coronavirus?

We are looking for data-driven business with machine learning as a growth engine across industries. That's our angle for making investments. With COVID-19, we definitely have more interests in healthcare.  This type of virus won't be a one-time thing. There will probably be ongoing challenges. We will see them more often in the future. So, we need more disruptive technologies coming into the biopharma industry. How can we expedite vaccine and new drug development? That is the one area we have since had more focus in our investment.

Which startups are more resilient and how can startups be more resilient given dramatic environmental changes?

I think it's related to their growth stage. When the startups are at the steady growth stage with loyal customers, they're less impacted by uncertainties. If they have raised enough capital, they are less worried about dramatic environment change. Within the next two to three months, they probably have to have a strategy to adapt to the change.  

Typically, we advise our startups to do the best-case-scenario and the worst-case-scenario planning. When they are prepared for the worst, that's part of their resilience and nothing can hurt them. They will only do more and do better. Or use it as a stress test, to strive for the best. We do believe, as, Winston Churchill said – “Never Waste a Good Crisis.”  We tell that to our founders when a crisis happens. Look at the crisis as an opportunity, and learn how to take it to make your team stronger, make your business stronger, and maybe find an opportunity that you have never paid attention before. That’d be making the most out of a crisis like COVID-19.