What’s Happening in the World of Venture Capital?

Clean Growth UK’s Investment Platform Manager Mark Riminton talks to three investors about the impact of Covid-19.

 

You may have heard about how the current Covid-19 crisis has affected the market for investments in Britain’s clean growth businesses. We decided to ask three leading investors what the ‘new normal’ is like for them.

 

Jim Totty, Director of Investment at Earth Capital

“Here at Earth Capital, we continue to operate and manage our investments despite the impact of COVID-19.

On a practical level, we are naturally having to adjust our ways of working, with most staff now working remotely and we will continue to follow government advice to ensure that we do not put anyone in unnecessary risk.

Whilst this isn’t a panacea to the abrupt dislocation caused by a pandemic such as COVID-19, it does ensure that we focus on investments in businesses that are future-fit.

Different approaches for different companies

It is vital to recognise that this crisis has not hit every geography equally, and therefore different approaches have been taken on different companies. However, we have provided guidance and direction to all of our portfolio companies, their management, and their employees. We have been continually updating scenario plans for each company, adopting the cash flow forecasting required. We are also monitoring all applicable changes to the regulatory environment that are relevant to our portfolio.

Of course, throughout our portfolio we are considering all levels of expenditure in the businesses, urging them to reduce non-crucial expenditure, concentration of stocking levels where supply chains are being challenged and continuity of the workforce.

In the short term, there is pressure to keep sustainable businesses funded for the next 12 months as EIS investment activity and corporate venture capital are both scaled back. They have both been tremendous sustainability and impact investors in the UK in the last few years, now other sources of funding will need to step up to the plate.

Focus on resilience

In the medium and long term however, for businesses seeking funding, there is now a huge focus on sustainable and resilient supply chains for energy, food, water and raw materials. This is 100% aligned with climate change mitigation. Local resources are at the top of everyone’s agenda. For example, our portfolio companies, Propelair in clean sanitation, and Arvia in industrial wastewater treatment offer significant water saving to commercial and industrial customers in countries around the globe.

Climate change will sadly pose greater and longer-term tests of resilience for businesses than coronavirus. Sustainability focussed funds have outperformed during the coronavirus crisis as investors focus on the long term as well as on risk mitigation issues. This will help funding to flow to sustainability-focused businesses.

Coronavirus has had devastating and tragic consequences, but climate change will damage people, planet and profit throughout this century. The financial markets are increasingly looking to provide finance to new sustainable business models that mitigate climate change and generate long term profits. Stay safe and we look forward to meeting again soon.”

 

Simon Acland of the Green Angel Syndicate

Since we set up, the Green Angel Syndicate management team has operated from our home offices. Our weekly management meetings have always been by Skype or Zoom, and we have gone to great pains to build a resource efficient on-line platform for our business using Zoho and Google Drive. So for us, it is internal business as usual.

Normally we hold five physical pitch events annually, but also distributed by video as our members are scattered across the country. Next week we will be holding our first pure on-line pitch event. At the moment this virtual event looks like being our best attended meeting ever.

It pays to be nimble

One of the big advantages that small companies have over large ones is their nimbleness. So it is no surprise that our portfolio companies have reacted very quickly to the crisis, controlling costs, accessing government support and adjusting business models. GAS has set up a Fleep page for our portfolio where we and our portfolio post and share useful information. That has created more of a keiretsu effect amongst our portfolio, which will be valuable going forward.

Putney, where I live, has become a great deal more pleasant as a result of the lockdown. No aeroplanes thundering overhead. A noticeable improvement in air quality. The High Street, once the most polluted street in London, is now bearable. I hope that a benefit of the crisis will be to show everyone that some of the things we have to do to save the planet are not just possible, but beneficial, and so that bad business habits will change for good.

Of course there will be a slowdown in economic activity. Some funding rounds may be delayed, and some cash resources stretched thin. But the issues of climate emergency, resource waste and environmental disaster being tackled by Green Angel Syndicate and our portfolio companies are so urgent, so vital to our future that this will only be a short term blip.

 

Clive Bonny, Managing Director at Strategic Management Partners

I mitigated risks of this crisis with a business continuity plan for disaster recovery using Responsible Business Standards. This pre-meditated disruptions to travel, access to premises and illness.  My home office has high speed broadband for video conferencing and updated secure software. I’ve just released a free video on business continuity planning to support existing and new clients, sponsored by Clean Growth UK.

New opportunities

I’m positive about change creating new business opportunities provided we adapt quickly to the new environment. Many managers can use home-working time to take stock of risks and impacts. This allows a re-plan to pivot resources for the challenges ahead. Whilst trades requiring buyer travel are down, online services such as coaching, mediation and trademarking have grown substantially.

My advice to businesses currently seeking funding is keep track of evolving government support and the many new online pitching and networking channels. Target private equity funders in your market. Use home work time to reinforce evidence of your investability. Update your business continuity plan. Contact qualified professionals who offer free and funded advice, like myself. We are happy to help.