Coronavirus hasn’t stopped VC firm Partech from doing deals — but it has led to changes in how it makes investment decisions.
By Marie Mawad in Paris
Tuesday 28 April 2020
Original Article from SIFTED: https://sifted.eu/articles/virus-planning-partech/
When another virus hits in a couple of years, how is your startup going to cope?
For European venture capital firm Partech, that question is now a central part of the screening process for entrepreneurs. The investor has persisted in doing deals despite coronavirus, but it’s also looking closely at how founders manage the fallout from the current pandemic, and how they prepare for the next crisis.
“In the coming five to 10 years, every startup will face one or two other crises like this one — the risk of this or another virus is going to weigh above all our heads,” says Romain Lavault, general partner at Partech. “We’re looking for entrepreneurs who’ve learned from the current situation and are anticipating the next one.”
The Paris-based investment firm on Tuesday announced the final closing of its third seed fund, at $100m. Money from the fund has gone to 40 startups, including eight deals completed since the beginning of the Covid-19 pandemic. Two rounds are currently being finalised, one of which was fully negotiated remotely.
Coronavirus is creating new opportunities and serving as an accelerator for innovative companies in health, work, commerce, finance, mobility and the computing infrastructure supporting all that, says Lavault. But it’s also forcing investors to reconsider how to value new projects, he says.
“There are lots of unknowns, and as investors we have to factor in that increased risk and ask who can best address it.”
“We’re still very much evaluating the quality of the team behind every project, and storytelling abilities are on top of our must-have list,” says Lavault. “But more than before, we’re also scrutinising profitability prospects, how much of a company’s performance relies on globalisation and how startups have dealt with the current crisis.”
For founders, that means being able to check off or address all the items on this list:
- Communicating to customers about business and safety in coronavirus times
- Reassuring employees
- Keeping a lid on costs
- Quickly nailing available loans and financing
- How long did it take to stabilise your company after the pandemic hit your part of the world?
- What do you think needs to change at your company after Covid-19?
- What’s different in your market now?
“There are some really varied reactions, from just furloughing staff to ride out the storm to deeper pivots and demonstrations of extreme agility and creative vision from some entrepreneurs,” says Lavault.
Follow Gen Z
Partech’s just-closed fund was set up with Generation Z in mind — how today’s 15 to 25 year-olds will do everything from shopping to banking in a decade’s time. Coronavirus is so far serving as an accelerator for most of those trends, says Lavault.
“Consumers’ priorities will change because of the current crisis, and centre more around health, family life, food and living spaces,” he says. “That will create new demand.”
Health tech companies face an opportunity to recruit more customers without spending as much on marketing, and there’s a huge potential for insurance tech to address things like cancelled trips, says Lavault.
But the crisis is also bringing forth some surprises. Changes in habits because of Covid-19 could boost demand for things like micro-mobility, robotics in the food industry and virtual reality — all sectors that were previously underperforming relative to expectations and were being given the cold shoulder by a lot of investors as a result, he says.
Among the eight deals Partech has completed since the beginning of the pandemic, here are the ones the VC has unveiled:
- Kaizo: Based in Amsterdam, the Netherlands, the startup makes artificial intelligence used for training customer support staff. These employees are typically based remotely, which makes Kaizo’s technology extra relevant to the current trends in organising work, Lavault says. The $3m fundraising round was announced at the end of March, and led by Google-backed fund Gradient Ventures.
- RoadSync: The US startup offers electronic payments services tailored to the freight industry. It raised $5.7m this month.
- Tinvio: This week, the Singapore-based startup backed by Rocket Internet said it raised $5.5m from Partech and others. The company helps grocery stores go digital for all things relevant to their supply chain.