Javelin VP and adaptations to COVID-19: how work will change and startups can be resilient

Our Sponsors June 29, 2020

Alex Gurevich from Javelin VP discussed their portfolio companies’ different responses to coronavirus, building resiliency in startups, and long-term impacts to how people work. Javelin VP, one of BASES’ sponsors, is a San Francisco-based venture capital fund, with investments from health to tech to education, such as online platform Masterclass.

How has Javelin VP had to adapt to the changes because of COVID-19?

It was sort of a gradual thing for us. Over a couple of weeks, we heard some more companies were starting to think about working from home before the state orders. So, we kind of knew a few weeks in advance before shelter in place started.

The first thing that we did is to just take stock of what's going on. We sat down and did a whole portfolio review, where we look through pretty much every single one of our portfolio companies to understand how they are being impacted today by shelter in place and COVID, and also what could happen down the road to these companies. And then [we] try to figure out what we can do as good partners to help them navigate through these periods.

Interestingly enough, we found out that we have more companies than I thought that were actually benefitting from “Shelter-in-Place.” That's related to the fact that you're seeing this massive acceleration of technology adoption cycles as people have no choice but try new products and services. People are at home, and they're trying new things, whether it's content or media software, productivity software, [or] digital health. All these trends were already happening, but they were happening [at] a slower pace. A trend that was maybe five to ten years out from really taking hold got quickly accelerated.

Of course, we also have several companies that were hit very hard by the pandemic—especially companies that have anything to do with interacting in the physical world. Their activity levels really plummeted. Heartbreaking to see that, especially if those companies had no choice but to lay employees off.

I would say our responses amongst our portfolio was really threefold. For the companies that were doing well, we were actually helping them to think about how to be more aggressive during this time. If you are fortunate enough to be in a position of strength when everyone else is retreating, you have to recognize the opportunity and seize the moment. If you're in a position where there's demand for what you do, you should be going [on the] offensive, not defensive. You still want to be very cautious and measured in how you do it, but you want to step on the gas a bit. Your marketing costs might be cheaper. It might be easier for you to access great talent. Seize your moment, take advantage, and act with conviction and strength. This is a chance to really accelerate much faster than ever before.

The second type of response, if your company has been adversely affected by the pandemic, is to cut costs and preserve runway. You have to survive. During this period, raise money if you can. If you can't, then trim expenses. Be nimble when it comes to your business model. Adapt it if you can so that you experience tailwinds versus headwinds (i.e. more online, less offline) The most important thing though is to survive. If you do that, then on the tail end, when a recovery happens, you're going to be in a much better position, probably with a lot less competition. You're going to have a lower cost structure, better habits as a company, and a stronger business model. And when the recovery happens, you may be able to accelerate growth much faster than in pre-COVID times. That’s the hope anyway.

The third point is, stock pile cheap assets for the recovery. Figure out what you need for that recovery. That will help you accelerate when a recovery does happen. As an example, advertising rates have dropped, so some companies could actually spend a little bit more money to acquire customers who may not be as profitable for them today. But in a recovery scenario, those customers will increase their spending and your growth will rebound that much faster.

For the companies that aren't doing too well, what are some ways to help them survive and get back on their feet?

All companies have the chance to figure out if their business model is resilient enough for this pandemic. If you're a company that can survive in a time like this, I think you have a pretty resilient business model going forward. That said, I don't think we need to be sitting here and saying, “look, we're going to be living in a pandemic mindset for the rest of our lives.” But I do think it's an opportunity for companies to say, “how can we be healthier, how can we have better unit economics, how can we do more with less?” That’s what we've been pushing a lot of our portfolio companies to figure out.

Has going virtual been an impediment to staying connected with other workers and portfolio companies?

Surprisingly, not as much as I thought. Maybe it's a function of venture capital. A lot of the job is already remote. You're talking to people from different parts of the country, different parts of the globe. Even within the same city, sometimes it's just more efficient to [make] a call. It's not 100 percent like it is now, but it's not as much of a shock for us as it is for other folks where they're going from zero to 100 percent. We're going from 40 or 60 percent remote pre-Covid, so it is not as much of a leap. About half of the companies that I work with are not in the city that I live in, so with them, it's pretty much business as normal. That said, it's still something that is very top of mind. At least with our firm, we lose out on the ad hoc conversations that happen when a random thought comes up and you can walk over to their office and have that conversation. Here, you have to be a lot more methodical and structured about how and when you communicate.

Helping our companies navigate work from home has been the most challenging because it's unusual if their employees are not in an office. They're having collaborative working sessions together all the time. To me, that was probably the biggest fear factor in terms of my portfolio companies - how is working from home going to impact these companies culturally, morale-wise. At the same time, I'm looking at the results of the portfolio companies are putting up, and it's pretty remarkable. For some companies, it's been difficult, but they haven't missed a beat. Their performance is better than ever. I don't know what the long term impacts are going to be, so we have to keep a really close eye on that going forward.

Hopefully, [when] the economy reopens more, a healthy mix will be nice for work-life balance. The fact that companies are doing so well [with a] remote environment will actually enhance the desirability of work from home. The other cool thing that could come from all this is now the stigma of work from home is going to completely go away. You can work from anywhere. Imagine being at a company where one month you're working in London and another in Hawaii, you're working at a truly remotely-distributed company. I think a lot more businesses will go down this path. Look at what Facebook announced [to shift thousands of jobs online]. How cool is that? Work at Facebook or Google, have an amazing career, but you could live anywhere in the world your heart desires!

Are you still making new investments? What does the startup field look like now?

We're making new investments, we're not stopping. It's a little cliché, but this is absolutely the best time to start a company. Venture funds are active right now, perhaps not in certain categories [that are] part of the “old world,” but certain sectors are doing incredibly well. There are so many people who are scared because they're unemployed right now, and scared for their health and financial well-being. They also know that when they do go back to work, their job could disappear again with the next shock. A lot of them will be thinking about how to add different skills to [their] toolkit to find a more resilient career. So, there's a huge opportunity for online education, as an example. Similar transformations will happen with digital health, e-commerce models, and company productivity software.

This is one of the best times to start a company because you can rethink old models and reshape the world that we live in. You are not encumbered by the legacy and burden of “business as usual.” You can build something for the “new world” and build [it in] a better and more resilient way. So, it's pretty exciting if you're an aspiring entrepreneur. Opportunities abound, and this is a time when amazing companies are built. We want to be active and betting on those types of entrepreneurs and companies right now. Our “doors” are open!