Tonight I’ll be sharing the same virtual stage with one of my heroes, Guy Kawasaki, at WeAre Summit, the world’s first virtual startup summit.
He’s the keynote speaker and I have the privilege of being on an investor panel hosted by Jasmina Henniova with my friends Bas Godska and Václav Pavlečka an hour and a half later.
We’ll all be answering derivatives of the questions how is the crisis impacting our world now, what will happen next and what will it take to survive and thrive?
History’s 20/20 Hindsight Helps Us See Beyond 2020
There is no doubt that the COVID Financial Crisis (CFC) will hurt the world more than last decade’s GFC and this Great Lockdown will be the first time since the Great Depression that both advanced and emerging economies will be in recession. We can only expect a partial recovery next year because we are experiencing an unprecedented sudden stop to the entire world economy for an undetermined extended period of time.
Beyond the financial impact, it is my shared prayer with you that we are able to flatten the curve fast because that means lives will be spared.
Staring into the abyss of the unknown makes us prone to catastrophizing the new normal with a distorted dystopian lens. Not to downplay the enduring impact this will inevitably have, but it is likely to surprise us how we will move on from this and how easily we might even forget in the near future.
With some 20/20 hindsight, let’s look at what is going on now to have a clearer view of the world beyond 2020.
Less Digital Disruption, More Inevitable Acceleration
The notion of the pandemic causing digital disruption might be a bit of an illusion. We are actually witnessing the acceleration of the inevitable.
One of the winning investment themes that emerged early on is to look at the players who already have the headstart in adopting everyday digital services in your markets.
Online shopping, financial services and teleconferencing have been on an upward trend for years. Quarantines only fast-tracked trial and conversion because adoption curves compressed from years to months or even weeks as we were all literally locked out of default real world equivalents.
Many FinTechs, with the possible exception of those facilitating unsecured loans, are thriving in the crisis. For example, Ayannah, perhaps Asia’s largest inter-operable remittance platform, has enjoyed steady volume growth in the past 20 quarters but since the crisis started, it has skyrocketed on an almost daily basis. Daily transaction volume and count records have been broken multiple times. All of this demand growth was achieved with zero paid marketing.
The sudden compressed demand can be overwhelming and firms have to find ways to flatten their own curves or raise the bar on their capacity. Even Amazon is trying to get people to shop less. An established global juggernaut or well-capitalized player might just need a few adjustments to stay on course. A timely investment could make all the difference for a local startup riding a wave of growth or drowning in a tsunami of its own success.
Asia Is Still A HotZone
Dealflow and fundraising has already been cooling in Asia over the last few years in anticipation of a global recession. In the early days of the pandemic, there were clear indicators of a VC funding drought hitting Chinese start-ups harder than the rest of the world. However that February data didn’t yet reflect the ripple reaching the rest of the world.
As the world opens up and the bigger picture unfolds, Asia is likely to race ahead because of three Ds- Dry Powder that is ready to deploy, Demographics driving faster growth and ingrained Defenses coming down.
Asia has and will continue to have an abundance of dry powder because large players still need to diversify. While local family offices may pull back resources to preserve their war chests and land banks, others may be inclined to pull the trigger on special situations and bargains.
Compared to other markets, Asia is anticipated to have the biggest recovery in terms of exports & GDP in 2021. The IMF forecasts Advanced Economies will grow 4.5%, the rates for China (9.2%), India (7.4%)and ASEAN (7.5%) are practically double. It will be a bumpy ride but we could start heading in the right direction in Q3 2020.
Arbitrage advantages being uncovered in developed markets like America have an amplified impact in developing markets like Asia. On a recent CNBC interview, Jason Calacanis discussed how Silicon Valley will stop paying the $40,000/ year premium they pay for people to work there. Shifting jobs out to Nevada is a step closer to hiring and managing a remote workforce in Manila. Again, the technological infrastructure has been in place for years, it is the corporate biases and cultural barriers which are finally breaking down.
Asia Does Not Actually Come In One Flavor
From the outside, Asia is often seen as a single market, but the dynamics from country to country can be quite diverse.
The current in-depth situational response of each country’s government, private sector and community impacts who will recover faster in 2020 and beyond. An inverse of the mortality rate trend per country may be a proxy indicator for recovery.
Unicorns, Camels or… Cockroaches?
After a string of failed IPOs, the investment world has become uncomfortable with the drunk growth over sober profitability ride of tech Unicorns.
Falling from their high horses, the emerging emotional support startup animal is the Camel. Focused on sustainability, this works well in picking winners in the industries hardest hit by the lockdowns. Travel and retail startups who built up reserves prior to the crisis and pace themselves smartly have the best chances of riding out this drought. People will get on planes and go shopping again.
Crisis or not, regardless of geography or industry, my fundamental investment bias is still for founders who are committed to building unkillable Cockroaches.
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Update 30 May 2020:
For your convenience, WeAre Summit has since posted the panel online: www.tinyurl.com/WeAreSummitJdLYouTube
If you found the discussion worthwhile, feel free to like and comment so they are encouraged to bring me back to the live event in Prague next year.
Thank you and have a wonderful day.
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Thank you to Tomas Cironis for inviting me to panel for the WeAre Summit.
The world’s first Virtual Startup Summit featuring Guy Kawasaki, Katherine Maher, Frank M. Salzgeber, Václav Pavlečka, Bas Godska, Joseph de Leon, Esther Wojcicki, Jan Zadák, Martin Pejša, Jasmina Henniova, Timmu Tõke, Markéta Přenosilová, Ivana Hronová, Martin Holečko, Thijs Sprangers, Michal Toporcer,Mahesh Murthy.
