Venture Investing in the Age of the Coronavirus
Here’s where VCs can invest to make a difference in the wake of the pandemic
Despite the economic impact of this crisis, there are many venture capitalists proclaiming they are “open for business,” eager to hunt down the next Uber, Slack, or Airbnb founded in the formative times of the last recession. The worst pandemic of the century appears to have occurred at the same time that the venture capital industry is sitting on a record amount of dry powder (unallocated capital) — $1.45 trillion in private markets by the end of 2019. As Stanford entrepreneurship professor Tina Seelig likes to say, “The bigger the problem, the bigger the opportunity.”
I am most motivated to be a venture investor in times like these, where we can clearly see massive problems within our existing ecosystem and partner with innovative entrepreneurs to meaningfully solve them. Let’s start by recognizing some of the problems brought to light by this crisis that could be aided by VC investment.
Health care and volunteer shortages
There’s a massive surge in the need for hospital workers — from doctors to nurses and administrative staff — on the front lines. There are also shortages of N95 masks, ventilators, and protective gear for health workers as well as a greater need for telehealth operations to provide advice, diagnoses, and ways to provide care outside of a doctor’s office. Food banks and blood banks have also seen massive drops in volunteers and donations despite their continued importance to serve a growing population of families in need.
We’ve already seen the early growth of many platforms addressing nursing staffing shortages such as nursing marketplaces Trusted Health, Incredible Health, and Medely, among many others. Additional opportunities lie in optimizing health care worker scheduling and worker support programs, especially for those nurses and doctors pulling multiple shifts a week.
I’ve seen lots of fragmented calls to action on social media platforms of friends with extra supplies of N95 masks looking to connect with health care providers in need. Huge demand and fragmented supply — a potential marketplace opportunity? Open Source COVID19 Medical Supplies Facebook Group is one of the best I’ve seen, but I have yet to come across a tech-enabled marketplace for masks or basic medical materials.
I expect continued explosive growth of telehealth platforms in primary and urgent care as well as other categories like mental health and women’s health. We’re seeing the expansion of telemedicine players like Hims and Ro and the rise of direct-to-consumer online pharmacies like Alto, Capsule, and Medly requiring no in-person interaction. Curai Health and PlushCare have also launched virtual coronavirus resources.
Communication and community
Many offices and schools are experiencing completely remote operations for the first time and need to establish infrastructure and collaborative tools to operate remotely. Parents are becoming schoolteachers and are looking for ways to engage and enrich student education at home. And many people, especially the elderly, haven’t had human-to-human contact in weeks. Gone are everything from in-person workout classes to happy hours. How do you maintain authentic human connection and stay in shape when you’re not in-person?
There are tons of platforms out there for every work need, from project management to goal-setting and team communication. What a majority of these platforms lack are ways to create and regulate organic team culture; Range is one of the few I’ve seen doing this. Keeping team productivity and morale high is increasingly important as the quarantine drags on.
Parents are already turning to platforms like Outschool to help their kids learn the fundamentals of remote school — keep an eye out for others that use Zoom as a platform to enrich the extracurricular sphere outside the classroom like Juni Learning. And kids aren’t the only consumer. Look for parents to sign up for similar platforms, too.
I’ve seen the resurgence of a lot of short-term fixes (e.g., Zoom happy hours, virtual yoga classes, and digital memberships for community clubs or centers) and a resurgence of Houseparty among my peer group, but I wonder how this surge will translate into longer-term consumer habits. The current environment represents a great opportunity for remote-first community brands like Peloton to offer free trials to quickly onboard new users and an opportunity for brick-and-mortar-first experiences to test out a digital way to interact with their users. Brands that successfully convert large percentages of digital-first users to paying users post-coronavirus will be big winners.
Overloaded infrastructure
All warehouse, fulfillment, and supply chain workers are considered essential, even amid the strict shelter-in-place orders enacted in many states. They are still going to work every day to ensure food makes it to our grocery stores and packages land on our doorsteps. However, Amazon recently suspended shipments of most e-commerce products besides medical and essential household items due to system stresses from the coronavirus. Brands will need alternative solutions to satiate demand levels from consumers, especially amid a spike in e-commerce orders over the past few weeks, putting pressure on national supply chains and logistics operators to keep up. About 75% of U.S. companies have experienced supply chain disruptions due to the coronavirus outbreak, including mask and ventilator producers — China manufactures roughly half of the world’s masks. Countless examples of U.S. dependence on China for essential materials present an opportunity and an economic imperative to diversify supply chain and manufacturing channels for U.S. companies.
I predict infrastructure and shipping companies targeting consumer staples and non-luxury e-commerce brands will experience strong growth over the next 12 months. Major companies like 3M need ways to manage and have visibility into an increasingly diversified supply chain. Look for companies leveraging technology to enhance tracking and prediction of supply chain and inventory management across domestic and global borders.
A different type of critical infrastructure — web infrastructure — is also increasingly important during this time. For example, how can we ensure the right people are on the Zoom call and security hasn’t been compromised? In the past weeks, we’ve seen the rise of “Zoombombing” or disruptive screen-sharing in Zoom video chats, and the U.S. Cybersecurity and Infrastructure Security Agency alerting all public and private workers to secure their systems and remain vigilant to attacks. Look for companies working to strengthen critical web infrastructure — in particular, those authenticating and verifying users and content as well as companies working to strengthen apps and websites powering beachheads in remote work applications (like Zoom) as well as new company IT strategies.
We’re living in an unprecedented time, and my heart goes out to those families affected by the coronavirus as well as the health care workers for their tremendous efforts on the front lines. And of course, these are just a few of the problems to arise thus far during this crisis, and I acknowledge there are several others that I have omitted and more that will come over the upcoming weeks and months. Nevertheless, I hope this exercise is helpful as investors and entrepreneurs reevaluate and reprioritize their company-building goals over the next few months and think of ways to use capital to help our country heal. This is a massive opportunity to invest in companies that meaningfully improve our society so we can come out of this pandemic stronger than before.
