One of these days (hopefully soon) my colleague Vin and I will sit down in front of a camera and discuss the best and worst things about startup investing in the middle of a pandemic. But before that happens, I’ve been tossing around a couple of ideas I want to share with you today.
The first is the importance of keeping it simple. Our world has been turned upside down. For most of us, our daily routine has radically changed. We look at mobility, socializing, our health and so many other things much differently than we did just a couple of months ago.
While the world is (and will be) different, the key is not to overreact. Here’s what you need to keep in mind. The vast majority of startups that pre-pandemic had the best chance of developing into a unicorn — say, eight years down the road — are still likely to fulfill their promise.
That’s not to say the best startups haven’t adjusted their behavior. They’re probably spending less and selling less (if they’ve reached the revenue stage). Product development has likely slowed down. And some projects may have been put on temporary hold. On the other hand, some are hiring top talent that recently lost jobs. Others can consider bigger office space thanks to falling rents. Present circumstances aren’t all good or all bad. And it’s not worth figuring out whether circumstances add up to a net positive or net negative.
Keep it simple.
If you invested in a strong startup outside the hospitality, travel and entertainment industries, then it should survive the pandemic. And it has as good a chance as it always had of prospering. The worst thing you can do is succumb to the current atmosphere of fear and pessimism.
Another thing to keep in mind is the pandemic has reinforced — and in many cases accelerated — pre-existing trends. People basically want the same things today that they did a couple of months ago. Online shopping, health & fitness, bigger TVs, more online learning, working from home and robotics were all trending up before the pandemic hit. Retail stores, red meat and baseball were fading without the help of COVID-19.
Some things will change. Business travel may never rebound to its pre-pandemic levels. Conferences are destined to turn into virtual events. Maybe we follow France’s example and buy bidets en masse… Or become more like the Japanese with 10% of the population at any one time wearing masks.
I’m only looking for those COVID-specific opportunities that were given a boost — but not a lifeline — by the pandemic. Yahyn, my last recommendation to you, fits that approach perfectly. Wine consumption and online shopping have both increased since the pandemic hit. But direct-to consumer services and online shopping are a strong long-term trend. When COVID-19 recedes, Yahyn isn’t going away. It should continue to thrive.
I’m continuing to look for startups that take advantage of short-term pandemic-induced behavior and strong long-term trends. It’s the best of both worlds. Simple as that.