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End to begin

“What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from.”

Ontem foi o meu último dia na Sonae IM e Bright Pixel.
 
Uma viagem de 2.054 dias onde pude voltar às minhas origens (voltar a viver perto da família na cidade onde nasci, no Porto) e onde fiquei irremediavelmente mais conectado ao mundo (por via das viagens a vários países, das inúmeras pessoas que conheci em todos os cantos do mundo, e fiquei ligado ao que mais inovador se faz em termos de tecnologia hoje em dia). 
 
Fiz parte de uma equipa que já investiu em mais de 35 empresas espalhadas pelo mundo, incluindo as 15 empresas que ajudou a fazer nascer através do papel da Bright Pixel no early stage. Uma equipa que tem a cultura de não divulgar muito os seus múltiplos sucessos enquanto investidores de capital de risco tecnológico de Portugal para o mundo.
 
Cresci muito e está agora na hora de partir para outros voos no mundo do capital de risco. Em breve darei novidades!
 
Yesterday was my last day at Sonae IM and Bright Pixel.
A 2.054-days journey back to my roots (living again closer to family in my hometown of Porto) with the bonus of putting me in closer touch with the vast world around us (traveling to several parts of the world, getting to meet incredible people, and above all, in the midst of what is trending in terms of top-notch tech innovation).
I am proud of having been a part of a great team that has already invested in more than 35 startups from different corners of the world, including the 15 that we helped jumpstart through our early-stage efforts at Bright Pixel. A team that has embedded a very low profile in its culture when talking about their multiple successes as venture capital investors from Portugal to the world.
I’ve learned a lot and grew to a point that gives me the confidence and tremendous satisfaction of tackling new challenges in the venture capital world. A truly special project that I’ll disclose very soon!
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Inside Pixel HoHoHo

Hit me baby one more time!

I don’t know if you remember, but by this time, last year, we launched 20by20. A brilliant (we believe) initiative that gathered several players from the Portuguese entrepreneurial ecosystem to give their vision on what would be the trends for 2020. As you can expect, none of us predicted that the trend would be … well … hell.

Don’t get us wrong. Our guest writers were actually really good predicting the technological trends and the pandemic accelerated the adoption of some of the solutions we’ve all been preaching about for some time now. Let’s take a quick look to the macro topics highlighted last year:

· 5G – it seemed that the new generation of broadband cellular networks was getting in shape in the beginning of the year, but it seems like we will have to wait a bit more while companies and regulators find a deal. Meanwhile, several industries are already preparing their products with software that benefits from this technology (e.g. ultra connected cars), so, we think it’s safe to say that we’re not that far.

· Cybersecurity – definitely a trend, but not a winner. Companies had major difficulties protecting their assets with the transition to home offices. Many still had on-premises servers and had their workers accessing them via VPN. It’s crucial to prevent and people are more aware of that, which led to a hot November for this industry.

· Sustainability – a strong (but no one expected to be this stronger) winner. Airplanes grounded, cars in garages and people consumerism at its minimum level. No one expected this. The planet gained a few days, and so the future generations.

· The gig economy – well… not a good year for it. Let’s skip this.

· Technology at the service of the humans – ding ding ding. Ladies and gentleman, we have a winner! We never saw so many developers, founders, creatives joining forces to create technological solutions to respond to so many different challenges of the societ

So, let’s do it again! Now with a special guest.

As you see, we really liked this concept. So, this year we invited 21 people to set 21 trends for 2021 – introducing 21by21. Excited, yet? First of all, who are they? They are founders, investors, businessmen and women, from different sectors and with different backgrounds. A conclusion that we always find interesting is that, even though we all belong to the same industry, one way or another, all of us have a very personal perspective and that brings value to it.

So, without further ado, the bets for 2021 are on:

·   Sustainability – elected by the second time in a row. No one expects consumer habits to go back to be the same, and people are more severe when choosing brands that show concerns with the environment and a transparent supply chain.

·   Short video will dethrone YouTube – new generations don’t have the same attention span, they don’t need more than a few seconds of video to know the highlights. Let’s see if this is the year of short videos and how influencers and entertainment industries will adapt to that demanding new process.

·   Brain food – mental health is now one of the biggest concerns of people and companies for 2021, and it is expected that more and more consumers will look for products that help them stay focused and fight anxiety, and that more companies will launch products with L-Theanine, caffeine and cannabinoids.

·   Hybrid work – All of us have already experienced the benefits (and challenges) of home office, but organizations are facing some additional adversities in transmitting their culture to their workers, so hybrid methodologies are being highly praised by leaders across industries.

·   Data – 2020 locked us down, so all we had was the internet. Companies collected years-worth of online growth and client & sales data, and they can now use them wisely (if they know how to…).

·   VC investors are hopeful – startups will have a major role in the recovery of economies worldwide and our part as investors is to boost them up. Governmental entities may also find in these private, agile companies a faster way to innovate and solve society’s new challenges.

Last but not the least, we invited a very special guest to participate: AI. GPT-2 wrote a very clear text of what it expects to be the trends for 2021. Curious? We were too.

Read more! and the past editions are also cool!

Thanks to all the participants of this initiative. It couldn’t have been possible without you. Let’s hope we don’t mess up next year too!

Thank you to those who followed our endless thoughts throughout the year. If you want to catch up, you can see what we’ve been talking about here…

March – Investment: “You can do anything. But never go against the family”

April – The unexpected new world

May – The winner takes it all

June – I want damage modeling

July – When the going gets weird, the weird turn pro

August – The bright new days

September – We’re chained

October – The perfect storm

November – Everybody be cool, this is a robbery!

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21by21

A great initiative powered by Bright Pixel!

My two cents… Read the rest at https://21by21.brpx.com/

Nobody could phantom that 2020 would end to be one of the weirdest years of our lifetime… so far.

So, it is really hard to accept the challenge to think and write about what 2021 has in store for us.

What I write below is based on three underlying premises:
First, that the future is mostly already here.
Second, that we can all desire that next year will be hopefully a return to “normalcy”… but it’s highly likely it won’t. The world will not be the same no more.
Third, we are all suffering and just grasping from the fact that the pace of change has dramatically increased and changed gears… right in front of us. We need to hold on… for the ride.

In 2020, we had to change how we live and all thought it would be just temporary… but, next year will we have still to adapt.
In several ways, I think we fast forwarded several trends that were already creeping around us.

In 2021, we will undoubtedly have to tackle several challenges ahead of us… and there is one thing I take for granted: our lives, for the better and for the worst, will become even more digital.
Namely, due to rising environmental concerns, health related issues, generational shifts and out of sheer and practical necessity… companies and people will do a lot more things in a digital realm.

Work, play, buy, sell, watch, share, collaborate, monitor and control – everything, increasingly online.

Finally, due to my role as an early stage investor, I have to try to have a stance on what might or not be a trend going forward.
For what it’s worth, here go my two cents about several key trends I believe will be picking up even more pace in the near future:

In the B2C world: digital entertainment is on the rise; online gaming and esports are becoming massive; we cannot keep up with pace of the vast array of sharing platforms that cater several niche interests; the way we buy everything is changing, and therefore, e-commerce is in constant flux; sustainability and environmentally driven decisions will impact more and more our daily actions – what we eat, wear, live and how we travel or commute; finally, above all, I feel that people are also a lot more focused on their physical and mental health and overall well-being…
(and all of this will be more and more mobile centric… simply because the zombie-like-neck-down human condition is here to stay, with everybody looking at a glowing device firmly held by one of our hands, whilst we walk pass everything around us…)

In the B2B world: “remotely-more, physically-less” working environments are here to stay; therefore, distributed cloud solutions to flexibly manage everything work process we have in our companies are on the rise; collaborative tools we be in also dire need; so will be cyber security products and services to protect ourselves and our assets from increased vulnerabilities and risks that we will all face; technology to handle contactless or unattended human interactions in customer facing services will be sought for in higher demand; hyper automation and extracting intelligence and decision making from the ever-increasing volume of accessible data is for sure an unstoppable trend.
Trends apart, on a ending positive note, 2021 will simply be what we will individually and collectively make of it!
“Every moment has to be complete in and of itself” (from Naval Ravikant: A Guide to Wealth and Happiness)

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Aceleração das Startups

so… this happened…

Juntou-se em debate Alexandre Santos (Bright Pixel/SONAE IM), Maria Moura Oliveira (UPTEC), João Pedro Fernandes (BERD) e Nuno Soares (INOVA+) para discutir a transição de programas-quadro europeus no âmbito de I&I e o crescimento de oportunidades direcionadas para as startups europeias, cada vez mais com foco no acesso a capital e nas fases de demonstração para a aceleração na entrada no mercado.

De acordo com os representantes das startups e o centro de inovação, estes instrumentos de financiamento representam não só uma oportunidade de internacionalização, através da disseminação e visibilidade em canais comerciais, como de networking para venda de serviços e/ou produtos a outra empresas. Apontam-se, no entanto, como aspetos-chave de sucesso a importância da seleção das calls e montagem de projetos sólidos, assentes no envolvimento de organizações com reconhecimento europeu na fase de piloto. Alerta-se ainda que para as start-ups é vital que as candidaturas estejam alinhadas com a sua estratégia de curto e médio prazo.

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chained

In the last few years, multiple transformations in the service and product industries linked to information technologies have taken place – all at a frantic pace as the web 3.0 evolved, matured, and found its place in the market. However, when considering the one that has the potential to be the most disruptive, blockchain is definitely in the spotlight. Nevertheless, since its announcement, there’s been ups and downs and it hasn’t exactly lived up to the hype.

Many factors make the world question if blockchain will effectively be part of our daily lives. Yet, at the same time, there’s already enough proof that the technology is more than Bitcoin and it can actually have a positive impact across different sectors. But don’t let us preach to you about it, let us show you what’s coming next.

Way beyond Bitcoin…

The popularization of blockchain happened mainly due to the use case of digital assets, commonly known as cryptocurrencies. In the aftermath of the 2008 crisis, Bitcoin was created in a totally decentralized approach without requiring governance from any formal entity. In an almost utopian yet controversial way, it poses as a mechanism for transferring and saving “value” in a fully digital and distributed format. Nonetheless, there’s a myriad of other applications aiming at changing the world:

  • Insurtech has stepped up the game and is using blockchain to reduce fraudulent claims and ease a process that typically takes up a lot of time and energy (checking evidence and making reinsurance more efficient). Lemonade is the reference startup (which has become the best IPO in 2020), but several other startups are disrupting the space with P2P Insurance (such as Teambrella or, once again, Lemonade) and Claim Management & Risk Assessment (Tierion is improving claims processes while Cropt is supporting insurers with satellite data to confirm the actual damage presented by farmers, and machine learning algorithms to predict the yield of crops and the risk associated).
  • Supply chains have been drawing a lot of attention with blockchain solutions being deployed to keep track of the goods’ route and also optimize logistics. We don’t have to go far for this one. Both Auchan and Lidl Portugal announced they’ll be tracing the origins of all food with blockchain as a quality control measure to meet the growing demands of today’s consumers. As for some of the hottest startups, it’s worth highlighting:Everledger, Provenance and  TE-Food.
  • In the civic domain, a lot is going on. Startups like WalliD, which is turning to blockchain to privately store users’ ID documents in a digital wallet and design a global protocol for digital ID transactions, and Civic, which has the same principles but applies them to the management of digital currencies, are exclusively focused on identity. Plus, if we take a collective standpoint, there are many other compelling initiatives such as Follow My Vote, which is fighting to bring more transparency to polls and put an end to election fraud, or, speaking of transparent voting, TAIKAI, born in our MVP program as a blockchain-based platform for hackathons, which is fostering open innovation by connecting tech enthusiasts to companies that have challenges and are desperate to solve them.
  • Regarding security, decentralized storage platforms are picking up steam. Nowadays, data is seen by many as more valuable than money, so hackers are sort of modern pirates. To avoid being looted, or in other words, to prevent breaches and better safeguard data, decentralized storage platforms such as the ones that are being built by SIA, Storj or FileCoin (based on IPFS) look like a good option because, instead of having all files stored at the same place, they’re broken apart and scattered across multiple nodes on a network, making it impossible to read the entire content from one fraction.

Blockchain can be set up to operate for a variety of purposes, and its community is committed to expanding the technology’s level of influence. Judging by its success and increased use, I would say it seems that blockchain is poised to rule the digital world soon.

Continue reading “chained”

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bright new days

The beauty of bright new days

August 2020. We are already more than halfway through a very exceptional and weird year and this is a special edition of our monthly newsletter where we are exploring a different format in order to talk about the changes we are promoting at Bright Pixel.

We have been gradually shifting from the three-step concept of Labs – Incubation – Ventures that we had started with at Bright Pixel to one that privileges the focus in investments and in supporting the increasing portfolio of startups we have in different phases of maturity.

And that is a big change for us.

We pivoted from a company builder studio with an early-stage fund, to an early-stage VC firm with a broader mandate to actively invest in startups with distinctive or emerging tech.

The following conversation is between Celso, our co-founder and CEO, who is starting a new chapter in his life, and Alex, our Chief Investment Officer. In it, they highlight the lessons learnt as investors in the market for four years now, and talk about what awaits them. Let’s start!

Roadtrip to John’s

Alex: Looking back, it is funny to think of how Bright Pixel was born. I had just joined Sonae IM’s investment team when the project was formally put in motion in late 2015.  In the initial discussions around the investment strategy, the main goal was to find growth stage venture capital opportunities in projects that already had revenues (ideally, +1m€) and that had ambitious plans to scale globally. But then there was also a will to dabble into early-stage investments as well. Clearly, one thing that was taken into account since the very beginning was that these were two different worlds. The way you analyse and support growth stage startups is objectively different from early-stage projects… That’s when you came along with way too many ideas!

Celso: I remember this. I knew two things when I left SAPO: I wanted to join the startups bandwagon and be an entrepreneur, and I wanted to get my hands dirty and turn a couple of great ideas into products. I knew nothing about investment funds back then. When we started talking, you crushed my dreams and told me: you have to choose one idea, and one only.

Alex:  That led us to brainstorm… a lot. We began by evaluating the ideas you had and also further understanding who could be a part of each project. However, we reached some sort of deadlock. We couldn’t choose one idea over the other. We needed to explore these opportunities with some sort of method.

So, we went on a road trip and spent a few weeks looking at and visiting company builder studios, especially in the US. One of the most interesting conversations was the meeting we had with John Borthwick, the founder of BetaWorks in NYC. He was kind enough to explain to us in some detail the merits and challenges of the venture builder studio model.

Celso: That chat with John was indeed the defining moment for the soon to become Bright Pixel. From there, we fine-tuned the concept, the goals, the underlying assumptions and the team that we needed to execute our vision.

Oxpecker & Hell’s Kitchen

Celso: I recall we kicked off with 11 people with varied profiles and the purpose of nurturing the birth of two projects that we initially chose out of all of the ideas we had floated upon and that could then evolve to a startup through our model.

One of those projects is Probely (originally called oxpecker, believe it or not), which has a fantastic team and a great product, and is now close to reaching their Series A stage. The other project was called Grafly but never turned into a startup and we had to drop it after a while (because we did not foresee how it could scale globally). It failed, which is fine.

We also decided to invest in our first startup literally the night before we formally announced Bright Pixel to the world. It was a pre-seed ticket in EatTasty, a company that started in our kitchen and now has an impressive growth potential in the market.

Alex: And, let’s not forget this, a couple of months later we were also launching our first fund.

Now, we must admit that the setup of the whole company builder model was challenging, mustn’t we?

We had this slightly romantic idea that working on tech projects in the Labs, most of which pilots or proof of concepts with bigger companies, would somehow not only be an important revenue stream for the studio, but also play out as a catalyst to create new startups and invest in them.

Celso: Yes, it sure made a lot of sense on paper at the time. But…

Just a title to increase suspense…

Celso: But then the hard cold reality taught us a few things.

In a nutshell, we found that it’s really hard to turn proof of concept projects and tech consultancy into MVPs and startups. Finding the right balance between generating enough revenues to sustain your operation, with enough volume to cherry pick the winners and upgrade them to MVPs, and having the right people at hand to jump from tech consultants to entrepreneurs, all while staying sharp focused on your early-stage investment activity, is near impossible.

There’s a longer explanation, but let’s keep it short. As a team, we decided to reassess the initial Bright Pixel model, and essentially wind down the Labs and the company builder studio configuration. And that’s what we’ve been doing for the last months.

Bright new beginnings

Alex: That made you rethink what you personally wanted to do, right? Whether you wanted to focus on the role as an investor or go back to your origins and be more in touch with product development and building new things.

Celso: That’s right. I learned a ton over the past few years. It’s been a privilege to have known so many interesting people from the startup ecosystem in Portugal and to have discovered so many amazing companies along the Bright Pixel journey.

I have absolutely no regrets. I have never learned so much about so many new things in so little time. For this alone, I feel immensely proud and grateful.

But as much as I like the startup investments world, helping startups and mentoring entrepreneurs, I like getting my hands dirty with tech even more. Drifting away from technology and building products for end users, and doing it at scale, not just proof of concepts, took a toll on me. So, I’m returning to that.

Alex: Can you tell us more?

Celso: I guess I can now. I’m joining Cloudflare as Head of Engineering for their Portuguese office this month. It’s an opportunity to return to my true passion, technology and product, at a global scale, for a company that I’ve been following over the years and I admire for its mission, ambition and culture.

Alex: Nevertheless, I hope we manage to have you around us at Bright Pixel, as an advisor within our Investment Committee, helping us analyse investment options and following the progress of the portfolio we have built together.

Celso: I will definitely stay close and will do my best to maintain a few advisory roles and keep supporting our startups.

Stay Hungry, Helpful, Humble and Happy

Alex: 2020 has been a hell of a ride so far… Yet, we have been lucky enough to see our 15 startups coping rather well in the midst of all the instability felt because of the pandemic. Now, we are focused on investing in new projects we have been screening in the market for a while ago. We have just announced our investment in the emerging field of unsupervised automated platforms for video and streaming services with the round we led at Replai.io. Hopefully, we will soon communicate another investment in a startup that is working in a sphere that has gained even more relevance as a result of Covid-19’s impact in our collective lives.

Celso: We have been talking a lot about this lately, and I see great potential for Bright Pixel in exploring what will be the trends of the new normal. Paradigm shifts always bring great opportunities. These almost five years of activity provided us with a valuable network of advisors and experts, and a growing alumni community, which will certainly help navigate this future like few can.

Bright Pixel will always have a place in my heart, and I’m sure I’ll be reading about many upcoming success stories from the work you, Junior, Fred, Marcos and the rest of the investment team will keep doing.

Alex: Hope so. Bright new days to come! We will be announcing several initiatives and news from our side in the next few months. Well, it is time to wish you good luck, Celso! And I know I speak for all the Bright Pixel family: we see a bright future ahead of you 😉

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When the going gets weird, the weird turn pro.

new edition of the Bright Pixel Newsletter

Weird times… with positive and negative impacts in our individual and collective lives. Personally, I have learned a lot in these last months… to value simple things, to better grasp that sometimes we tend to waste time in matters that simply do not matter, to learn more about the virtues of patience and keeping calm. I lost a bit of weight, I am also increasingly fitter and healthier, and I got closer to friends and family, oddly enough, because of the imposed social distance.

Professionally, we have proven that working together remotely works quite well – we can be highly productive and efficient, working actually more due to a better management of time… but, all of this has a toll after a long period of time. We start to miss personal interactions and the intense back to back routine of endless calls starts to sink in. To maintain company culture and build on top of the long last relationships that we want to explore with our stakeholders, we will need to mix remote with physical contact.

Weird times… indeed. Full of personal and professional challenges to overcome and opportunities to explore to our benefit.

Tech will save us all

Covid-19 sent everyone home and, three months later, not everyone has returned. In the US, before the pandemic, already 4.7 million or 3,4% of the population worked from home, and the number is increasing – according to the U.S. Census Bureau, nearly one-third of the U.S. workforce, and half of all “information workers”, are able to work from home.

Now that everyone is experimenting with the benefits of working remotely, the will to return to the offices is vanishing, with 98% of people saying they would like to have the option to work remotely for the rest of their careers. The same respondents praise the flexible schedule (32%), the possibility to work from anywhere (26%) and not having to commute (21%).

Just on a side-note, not having to commute has a very positive impact on the environment too: Xerox estimated that it saved 92 million miles of driving by allowing its remote workers to avoid commuting, thereby reducing carbon emissions by almost 41,000 metric tons.

This opens up new opportunities for collaboration tools companies, as we have seen in past newsletters – is now the time when virtual reality and augmented reality will enter our daily lives? The expectations are high. Also, it gives companies new chances to re-evaluate their cost structure. Yeah, you read well.

Remote working allows companies to avoid some basic costs such as internet, work computer/phone, or food allowance. In an inquiry done with US workers that worked remotely, 80% of the respondents said the company did not pay for home internet; 72% did not get their phones paid; 87% didn’t receive for costs related to drinks/foods in coffee shops. This is something very small – you already pay for the internet and for your phone –, but there isn’t a good principle behind it.

So why should they keep their high cost offices in Silicon Valley if their workers prefer to work from home? And if they can work from home, then why can’t they be anywhere in the world? Twitter closed its offices until September and Facebook is planning not to open them in the long-term. If companies don’t have a physical space, they can hire people from anywhere in the world and we all know that some countries/locations offer higher wages than others.

Events without sales and networking

Tech events are a big opportunity to generate new leads, which is now more relevant than ever, considering that startups’ survival depends on their sales – 50% of them said they had 6 months or less of runway and 72% saw their revenue drop since the beginning of the crisis with the average startup experiencing a decline of 32%. When all these events are being canceled, postponed or done virtually, how can entrepreneurs do business? Experts say: organize your own event, bet on content marketing, be popular on social media and work on your marketplace.

Going back to the offices

But there is also another way of thinking – the Bank of America and IBM (in the US) believe that innovation and collaboration are essential and can only be done right in person, so they are doing all efforts to bring people back to the offices

Gigging up!

While companies can send everyone home and expect to reduce their fixed costs by cutting real estate expenses and offer lower wages, some believe that it will have a negative impact on the organizational culture and the emotional connection to the company will be lost, meaning there are no reasons for people not to switch to something new that makes them feel more accomplished. There’s an opportunity for the gig economy to be filled with knowledge people.

If new companies are the new cornerstones of the economy, let’s help them!

New companies, tech companies, can save the economies from a complete breakdown, so shouldn’t all governments take some time to think about how to help them? As Startup Genome recently posted in its annual report, continuing to invest in local ecosystems will reinsure its growth and, consequently, will produce more value.

And since this is all about innovation, BCG shared its annual list of the world’s most innovative companies – led by the three A’s: Apple, Alphabet and Amazon – and Sifted shared some lessons about what we can learn from them.

Although none of these companies are European-based, the old continent is becoming more competitive when it comes to innovation – on the one hand, the EU continues to have a better performance than the United States, China, Brazil, Russia, South Africa, and India; and on the other, Europe has more ecosystems in the Emerging Entrepreneurial Ecosystems list than the other continents. And there are people who strongly believe that Europe is better positioned than ever before to lead the way from now on.

Read the full newsletter

Subscribe!

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the winner takes it all

Our third edition of Bright Pixel Newsletter – subscribe here!

The winner takes it all

Today is my 51th day confined at home. I would rather we weren’t in these circumstances, but I must admit I have been enjoying the slower pace. There’s a sense of guilt about it, but it was good to realize I wasn’t the only one.

Unfortunately, most businesses are unable to enjoy the silver linings of this situation. Covid-19 has been putting all companies to test, leaving them to the brutal and unsympathetic forces of natural selection. As it often happens in most crises, some players will thrive, while others will struggle to survive.

The winners and losers could be purely  temporary. Most meetings might revert back to face to face, and our problems with overbooked planes and crowded restaurants could soon be back (miss this already?).

Telling long-term winners and losers is much harder than just predicting short-term adjustments. The world has been predicting the demise of cinemas and brick-and-mortar retail for too long now.

 

At this point, we already have some clues about who these winners are

Enterprise software has seen increasing  demand for their services. Zoom is the most obvious one here. As of 28/04, its stock has appreciated 140% since the beginning of the year. Slack is also attracting the attention of remote workers. According to a series of Tweets from the CEO, its user base has grown from 10.4M in March 16 to 12.5M, just 10 days later! Facebook is also joining the party by releasing messenger rooms and even Skype has awakened from the death to make some new announcements lately.

Entertainment is going through some big momentum too. On 21/04, Netflix has crushed investors’ expectations by adding 16M new paying subscribers, more than double of what was expected by investors. Disney+ has seen tremendous growth adding 50M subscribers in its first 5 months, and HBO Max is set to launch in May. Expectations are high.

When it comes to short-video, the youngest social-media giant, Tik Tok was downloaded 2 million times between March 16 and 22, an increase from the previous week’s 1.7 million. The emerging short-video platform Quibi, a high-profile startup in the valley that has raised $1.8B, was made available to the public in April, and Youtube announced it is working on a competitor.

Among the best performing sectors this year is healthcare. Finding a cure for this virus would be the best news for any stockholder (and everyone in general) in a pharmaceutical company. At the same time, technology is also gaining space in a science-led industry. From real-time well-being trackers and medical professional’s support systems, to less obvious spaces like sextech

 

Many are struggling but not backing down just yet

Mobility is definitely one of the hardest-hit sectors. Even with questionable unit economics, the sector has been one of the hottest investment topics in recent years, with Bird holding the record of the fastest startup to ever reach the unicorn status, in only 2 years. Right now,  these companies are reinventing their purpose, such as the micro-mobility company, Felyx, that has made their electric scooters available at a reduced rate to entrepreneurs who want to serve customers at home.

Tourism and hospitality are also going through a rough period with most restaurants and hotels closed.  Travel companies are providing virtual booking services for sightseeing and others, such as online-only classes and webinars. Restaurants are selling vouchers for post-Covid-19 meals to keep their businesses alive. Airbnb has also debuted online experiences and their accommodation offers are becoming less short-term and more long-term rentals. Even movie theatres found a way. In a very “back to the future” style, some are promoting drive-in experiences. Do you have Grease vibes?

 

This time is different

At the risk of falling for the same trap of those who predict the end of industries for too long, we will place our bets on who the long-term winners will be.

The first one is Cybersecurity. The growing importance of this vertical is not new. As people and devices become more connected and dependent on online services, cyber risks increase significantly. Still, IT architectures are shifting towards becoming more decentralized and reliant on 3rd party services, exposing companies to new attacks and increasing their vulnerabilities. Just in March, online threats have risen by as much as six-times their usual levels. By accelerating remote work and promoting digital environments, this crisis emphasizes the relevancy of cyber security for years to come.

As we scale-down human interactions, our reliance on digital engagements is increasing. Existing user interaction platforms must evolve towards automation and new interfaces. We’ve never seen brands being so dependent on customer experience as they are in the digital age, and now, more than ever, customers are unsatisfied. They want refunds of their trips, they expect their favorite restaurants to have take-away, and they order groceries to be delivered within a day. How to deal with such demanding clients? You’re right: with a very efficient contact center and an optimized virtual assistant.

For the near-future, we expect a bumpy road ahead with lower growth expectations, scracer capital availability and rising unemployment. Still, on the health front, things seem to be improving, and hopefully, the peak of the worst health crisis of our generation is past us, and we can go back to business (almost as usual) soon enough

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venture capital threads

fred destin
a great twitter storm about the effect of coronavirus in our venture capital lives…
 
1/ A little thread on how one venture capitalist thinks about the pandemic from a fund standpoint
2/ First of all stating the obvious — this is first and foremost a global scale humanitarian crisis right now. It’s staring us in the face but from (most of ) VC Twitter you wouldn’t know it.
3/ My job is to manage a fund. As such my first take is to form a view on the depth of the crisis. The difficulty is that no one can model this thing. Any forecast we make is more likely to reflect our own appetite for risk and view of the future than anything else.
4/ Analysts are paid to produce numbers, and so numbers they will produce, but we do not believe that any macroeconomic model can cope with the current situation, in the same way that the 2008 crisis broke the “dream machine” of risk models that underpinned credit derivatives.
5/ Neither do we trust the numbers coming out of China, or think that any of the South Asia countries are out of the woods yet. We will see. There is too much we don’t know. The best hope lies with science (notably, cheap testing).
6/ We do however have to advise our startups on what to do, so we need to form a somewhat informed view of the future, and a decision framework. As Howard Marks recently told Harry on his podcast, investors cannot let themselves be impacted by emotion.
7/What we can reasonably assume is that it will deeper and longer than 2008, probably harsher than 2000-2003 and probably, hopefully, nowhere near as bad the Great Recession.
Government response, agile manufacturing and health / biotech mobilization should ensure that.
8/ Because travel and trade froze at the same time, and given that the whole world is gradually moving into lockdown, the global economy is experiencing a combined supply and demand shock which is unprecedented.
9/ Working capital gets hit first and hard, with household wages and consumption following in lockstep. Credit follows naturally.
10/ Governments have played the Quantitative Easing game non-stop over the last few years. Rates are so low that even the Fed has nowhere to go, and it is unclear what rate cuts would achieve anyway.
11/ The US is also hampered by deep partisan politics which render both federal government and states less effective in their stimulus response. All this does not bode well.
12/ On the other hand comparisons to the Great Recession seem excessive — governments have long understood how to use Keynesian methods in recession, and the massive stimulus packages are witness to that.
13/ We are anticipating a deep dive that will last 12 months or more, followed by a tough period of stagnation before a return to growth. As I said, these are planning assumptions not forecasts, and they will be overrun by facts week after week. Hope this tweet ages badly.
14/ In the face of such uncertainty — VCs will look at existing portfolios first and look at (a) crisis impact company by company (b) financing risk on the existing portfolio (c) valuation risks.
15/ At @stride_vc we are relatively “lucky” in that (a) we invest at seed so burns are usually low and valuations are reasonable (b) almost all our companies are funded into 2022 (c) we are only about 30% invested and early in our investment history
16/ The companies most at risk are those who have recently starting investing into growth and are into that weird “Series B gap” where you start tooling up for scale and are heavily reliant on hitting growth forecasts. A tough place to be right now given the uncertainty.
17/ Per company assessment yields a surprising picture – a majority of our companies are not currently seeing a major impact and a few are accelerating. I don’t know how long this lasts. The point is that the data does not tell you what you’d necessarily expect right now.
18/ The immediate adjustment tends to be hiring freeze and a hard reassessment of cash flow forecast with deep cuts in growth and a significant uptick in churn. Anything else and you’re probably deluding yourself or not being prudent. That is the only way to forecast runway.
19/ We tell all our management teams that forecasts do no matter anymore — the only things that matter are (1) taking care of your team (2) making a calm and dispassionate assessment of the impact on your business (3) taking a few but well reasoned decisions right away and …
20/ … deciding very exactly what to measure and what leading indicators you are going to monitor obsessively to determine where your market is going. This is completely company specific, and it is important to avoid confirmation bias on positive news.
21/ Right now I am SURPRISED at how functional our companies’ clients are in the face of this pandemic – decisions get made, deals get closed. Large corporations have not frozen in the face of this crisis – they are moving, and fast. Long may that last.
22/ From an investment standpoint – we here hit the pause button for a bit — I am not smart enough to process this information and have confidence in our decisions on new investments, and our focus is 100% on assisting our founders with hands-on advice.
23/ Whether we hit pause for 2 weeks or 2 months I don’t know yet. We invest money on behalf of other people and right now we do not feel confident putting cash to work. I read voraciously and try to understand as much as I can, and I haven’t gotten my head around this yet.
24/ What is absolutely clear in my mind is that you can expect deal volumes to plummet this quarter. It makes for good marketing to say that you are open for business, and I like the positivity, but we need to see how much $£ actually gets put to work.
25/Uncertainty kills decision making.
VCs are in the business of taking risk AND managing risk.
Right now you can take it, but in most cases it’s really hard to manage it
PS/ and for clarity, since question was asked, yes we absolutely do support our existing portfolio companies.
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The unexpected new world

Second Newsletter done at Bright Pixel – subscribe here!

Life as we know it has changed in the last few months. It started as something that was only happening in China to something that’s keeping us all awake at night and concerned. Some said it was inevitable; that, sooner or later, something like this would happen. 14 years ago, Larry Brilliant, the epidemiologist who helped eradicate smallpox, described to a TED audience what the next pandemic would look like. At the time, it sounded almost too horrible to take it seriously.

We’re not facing the end of the human race, but what everyone failed to predict were the human and economic consequences of such an impactful event. Research, medicine and, unfortunately, even some lives will help us overcome this situation and build a better world, based on our learnings from our previous errors.

However, once we are back to our daily lives – even before that – we will face a new economic reality. Right now, our lives and markets are frozen still. As USV founder Fred Wilson noted, while all assets are probably subject to a sell-off in a crisis, the market begins sorting winners and losers fast.

It’s time to look at this atypical situation as an opportunity to change, to start creating and implementing solutions that we wouldn’t dare to think about before in such a globalized, interconnected, fast-paced world. Let’s take the time we have been given to reinvent ourselves and face a new market reality.

A brief look at the world
Tribe Capital warns that a downturn can take years of cascading developments to fully express itself, if we consider similar past events. The international issues that have marked 2020 so far led to a spike in market volatility leading the S&P 500 declining 30% from its peak in just 16 days. In the 2008 debt crisis, it took 350 days to decline almost 60% from its peak and it still didn’t bottom out for another 200 days.

While ones are experiencing the need to dismiss their employees, others like Amazon or Walmart are surfing the wave and foreseeing the possibilities ahead of them. This tech giant announced plans to make 100 thousand new hires for its logistics operations and the Walmart is hiring another 150 thousand. Moreover, specifically in venture capital, there are new attempts emerging to counter the panic by mediating between firms still cutting checks and the companies that need the money. A new program called Luma Launch out of LA has already gathered 400 names of investors seeking activity. There is a sense of irony, however… because Luma itself will not be among those investing…

The VC narrative

There is more than one voice advising to prepare for tougher times, so investors are slowing down their analysis of new opportunities whilst reaching their portfolio companies with important recommendations to keep their businesses sound. Priyamvada Mathur lists the need to cut unnecessary expenses to extend cash runway, expand the customer base, be sure to have a dependable board of directors and, at last, but not least, how to become a great storyteller about how the company is successfully solving a problem…

Redpoint Ventures’ managing director Tomasz Tunguz also leaves six startup disciplines for challenging times, including the focus of the team: while sales teams need to keep pipelines primed by wooing existing customers, CEOs need to think about transitioning from management to leadership roles. Sequoia also warns their founders and CEO’s for the effects of Coronavirus, the black swan of 2020: some companies may experience softening demand; some may face supply challenges. While the Federal Reserve and other central banks can cut interest rates, monetary policy may prove a blunt tool in alleviating the economic ramifications of this global health crisis

What’s coming next?

We don’t know exactly what that world will look like – although Sequoia has published a matrix with several economic macro scenarios -, we can imagine some of it. Basically, take the trends that were already in motion and hit the fast-forward button. Virtualization of events, activities, and interactions – the MIT Technology Review says that social distancing is here to stay for much more than a few weeks. Automation of processes and services. Political and economic decentralization. “Now is the time when we need to think about what we would like the new world to look like, and start planning for it and building it”

What do the numbers say? CB Insights sees a 16% quarterly decline coming in Q1’20 – second only to the 36% fall between Q2’12 and Q3’12 – and it is expected to decrease even more in the next quarter. While the analysts at Pitchbook see COVID-19 as, at least in part, exacerbating old trends. Sustainability and profitability, which are quintessential to surviving any downturn, had re-entered the VC lexicon no later than the WeWork debacle. The founder-friendliness in term sheets had already taken a blow, with investors simply demanding more, and that should be expected to continue. Exits, which had already receded somewhat after the IPO frenzy, will also fall again; despite SoftBank’s considerations mentioned above, many firms will also probably be less than willing to sell assets at lower valuations. At the same time, there is no lack of potential dry powder, so even with fewer exit possibilities, investments will probably not be hit in the same way as in 2008

A moment to enhance the Portuguese entrepreneurs

Some Portuguese startups, among them some of our portfolio companies, such as Jscrambler, Probely, Automaise, Taikai, Reckon.ai, or EatTasty, are taking efforts to become even more relevant and put their know-how and solutions at the service of the society and health entities. We’re proud to see that when needed, there’s no competition