Coronavirus forces tech investors and startups to ditch the all-important pitch meeting
- European tech investors and startups have been forced to change their working strategies in response to the coronavirus pandemic.
- It's led to hiring freezes, pitching being done via video conference calls, and meetings being cancelled along with non-essential travel.
- Tech funding is highly oriented towards networks, with investors favoring warm intros and face time with founders.
- Investors are putting an optimistic face on the changed landscape, saying they welcome the reduced carbon footprint and the greater efficiency of online pitches.
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As much of Europe moves towards working from home, venture capitalists and startup founders have had to adapt nimbly. Funds must be spent, and startups need cash.
Some European venture capital firms have moved their entire operations online, eschewing face-to-face meetings in favour of video conferencing for pitching.
It's a stark change for founders who are normally ushered into intimidating, gleaming London headquarters for the major funds and have to go through the gruelling process of pitching to a panel of investors.
For the short-term, online meetings look more efficient
Early-stage funds Seedcamp and France's The Family have moved entirely to online events platform Hopin, itself a nascent European startup that recently raised $6.5 million in seed funding.
It's a notable, if temporary, shift from a culture that has tended to prioritize "warm intros" - introductions via networks and contacts - and strong personal chemistry between investor and founding team. A 2017 survey from UK Innovation Hub and Tech City UK found that the most important factor for companies considering raising external investment was personal chemistry and trust with the investor.
Most VCs take a kind of perverse pride in living on planes in order to meet portfolio firms regularly.
They're now finding efficiencies in switching from in-person meetings to video calls.
Oliver Thomas, managing partner at Grafton Capital, said the company was simply able to do more through video calling.
"We can be much more accessible to portfolio company CEOs and first meetings can take place with extremely high engagement, but without the time, expense and carbon footprint of travelling across Europe," he said.
The switch to video pitching also means a shift in etiquette. A call means no handshakes or other social signifiers.
Rob Moffat, a partner at Balderton Capital who regularly runs video pitches, has this advice: "On videoconferences it's even more important to make sure it is a a dialogue between founders and investors, not a monologue. Keep your audience engaged."
He recommends starting with small talk before showing pitch deck slides, setting limits on talking time before interrupting to ask questions or check comprehension issues.
Startup life will be on hold - meaning hiring freezes and maybe firings
Despite this short-term optimism, investors are cautious about the impact that months of remote work could have on businesses in their portfolio, some of which are quietly freezing hiring.
"Every single company in our portfolio has had to come up with COVID-19 planning, risk mitigation and a strategy to weather the next nine months (in case the downside is that long)," Eileen Burbidge, partner at Passion Capital, told Business Insider. Passion is an investor in some of Europe's leading startups, including Monzo and Tide.
European investors are advising startups to shore up cash and reduce unnecessary spending to try and weather the next few months. And just because work is becoming remote, they say, doesn't mean company leaders should go quiet.
"During this period of uncertainty, communication will be paramount," said Karen McCormick, CIO at Beringea. "Good investors will be speaking daily with founders to provide support, guidance and insights from previous downturns."