How COVID-19 Impacts Startups and Venture Capital with Ali Hamed and Brent Beshore
Hey everybody it's co founder. Partner village global aid network driven venture firm and this is metro stories a podcast covering topics related to tech business with world leading experts. Everybody we're now accepting applications for network catalyst accelerator program founders in. Our Program have gone on to raise money from LUX SPARK A sixteen Z. Slow First Round Susa homebrew Maveron obvious and affects signifier and many more learn more at apply at village global dot V. C. Slash network catalyst. Everybody welcome back to another episode adventure stories by village global here today rejoined by two very special guests back by popular demand. All Co venture and Brent be shore of Permanent Equity Brent Permanent Equity is new brand. Yeah UNPACK IT. A little bit for us. Well after I came on your show I mean my brain was so tarnished that I had had to rebrand. So No it's It's something we We rebranded Let's see here Eight weeks ago six weeks ago. Something like that. I don't know times I don't know what data's right now. So but we wanted to get a brand that More closely matched. What we're doing and to be frank. I was tired of having people. Ask Me if we were based in Spain or you know if if it was Edvin tour dot E. S. or whatever the whatever. The flavor of the day was or emails getting rejected from servers. Because it looked like we were spammers. So yeah so we got permanent equity thank goodness for the foresight of Patrick o'shaughnessy who When I first started talking to him cash three and a half four years ago now About permit equity using the term permit equity. He was like I really like that. And then you know He about a month later said Oh by the way. I bought the domain I think this is GonNa be a thing and I was like. Oh that's cool. Whatever and then I went to him You know I don't know four or five months ago and said Hey. Do you mind me coming back from you so anyway. Yes we're we're permit equity Same same company. Same Location. Same philosophy new name Cool Hill I've been trying to buy co-venture dot com for years and the the guy who owns it is represented by attorney in Canada. And for whatever reason they just won't come to the table I'm like I'm like a pretty motivated buyer. Let's have the conversation. Will I know they're listening to this song excited for them to come to the table and Brennan excited to put put permanent equity on the map in this market? I think the price is definitely depressed. A bit yes. They are listening. You're hedging already. That's fantastic okay. That's a great segue in this market alley. You wrote a blog post the other week talking. About what the market means for each? Vc industry why don't we you know what does it mean? I how should be sees be responding to it. And what does what B.'s believe about what the future holds was market determined? How they should out. They should act as a result so I think the first reaction was an adventure community. Broadly like okay. The market's down. Why does that affect us? You know we're long-term thinkers and this is GonNa last temporary period of time but if you're invested in a company should have a five to ten year view anyway. So who cares and my comment back was the problem is not that. The market's down. The problem is the reason markets down and the reason. The market's down 'cause like everyone got sick. Some people died had to go home and they stopped buying stuff in. That's pretty bad you know what the stock market's down but that's not the problem. The problem is demands down into the idea that like this isn't going to affect venture capital. I thought was fairly naive. You know I think a lot of venture capitalists took it as an opportunity to like market themselves on twitter. Which whatever that's fine he'll do all the time but I do think it was a little. Bit misleading the entrepreneurs and so now just like everything on twitter. It's like two different polar opposites so the Omega. You know if you're if you're investing now like that's crazy because we're all on hold and whatever and is the other can't which is like if you're slowing down your investment pace now you're just a tourist and you clearly don't have a long term view and the answer somewhere in the middle. The answer is everyone in the portfolio. Who has a lot of portfolio investments? And I use the word. Everyone and it's harder to find absolutes. Inevitably someone's going to come up with counter example. Most people who have enough investments Have a company. That's totally fucked right now. And you know. The company may have lost ninety percent of sales. It was a company that may be was doing. You know a million dollars revenue a month. We had a net burn of two hundred thousand dollars a month. They had enough runway for eighteen months and now they have four months of runway or three months a runway and they're not really sure if those deals come back at all until they run out of cash so VC's have to spend most of their time for least a few weeks figuring how to create bridge browns or solutions or layoffs to those companies and on top of that because there's less demand right now. Top line growth is going to slow down. Usually third-party financing's happen. Because of seven hundred percent or more year over year growth some sort of new inflection point is reached and many of these companies are not gonna hit that inflection point this year which means evaluation may not be able to go out which means that they're they're funds are going to have to do inside around for that which means that. I have to go back and say how much am I reserve capital do I have which means they can print less new names so yes less. New Deals will happen. Doesn't mean no new deals are going to happen. No that's not true. We closed the deal on March fourteenth. Close another beyond March thirty first. We'll probably do two more deals in April but the opportunity cost of new dollars is low and the last thing is i. Think a lot of entrepreneurs in normal times view it that if they do it down round. It's very scary for the market. You know visas really loved pattern recognition partly because they're generalists and partly because they don't really know a lot you know. Aside from people who focus on certain vertical generally venture capital is a venture capital is done by journalists who looked at pattern recognition to the side of deals. Probably good and I'd like to see a seed round and then a series I and then a series b. with reasonable growth in between and we've all come up with these insane terms to kind of make things fit within that we have seen extensions now and like series A. Extensions that way you know. It fits perfect story. A lot of entrepreneurs have adapted to that and so when they go out they need emergency financing. What they're doing is they're reopening their last round or they're trying to they're trying to avoid down route because they know historically that's been really bad. I've now seen a handful of entrepreneurs tried to do that and see all of their best prospects of investors. Just write back and take the meeting. Hey sorry not for us. Because the market has adjusted in entrepreneurs. I think haven't either gotten rational advice of. We don't know too optimistic vice looking at twitter and seeing everybody say oh our doors are still open. It's business as usual and I think that's probably damaging people we have seen people raise rounds exactly like they were going to before writing. That's minority not the majority because there's more risk in the market now so I'm just talked a ton but that's sort of this summer quick question for you What how do you? How do you see opportunity costs in venture capital survey impacting? You know the evaluations of these companies is it is there sort of echo as other assets drop in valuation and sort of rising attractiveness depending on what you believe to be true about the world. How does that? How should somebody think about the opportunity? Cost of impacting today. Shins so I think you know in other asset classes is probably easier to measure so right so like in credit markets spreads went up by seven hundred basis points and so then you know in our credit fund which we manage. We now know that if we used to retarget an extra turn now it's X. Plus N I dunno and is but if you're one of our limited partners and he used to be thrilled about whatever return we are getting and you were comparing that to like liquid. Abs or liquid high yield And you needed some premium because we're illiquid You would then say well if I used to be happy with that but I can get a better return on my other portfolio. And that's what I compare you to. You need now need a higher richer. And you're GonNa see that all of our competitors and credit or given the same thing and on top that. I know that after two three more months defaults will start to occur. They haven't yet and when that happens if I invested dollar today that means I have one less dodge invest tomorrow when you have gone up in Venture. There is sort of that opportunity. Cost and new. Casa capitalists actuated but. That's the short term. Fact is because today I can do bridge rounds into really high quality companies at really low valuations that. I never used to get to do before you know. It used to be that if I was seen some company in a reasonably large base that was growing and growing one hundred percent year over year and it was doing seven figures a top line revenue. There is no way that that deal wasn't going to get a bit up by handful firms. Now there's so much of that happening. There's so much triage that. I'm getting to do deals that like I am. I can't believe that the lock it does mean that when another company comes to me my opportunity caught like I can still only do a certain amount of deals in my mind. I probably will do more deals in twenty twenty than I do in two thousand twenty two. But you know I'm still you have to be for you have to compete for my attention with another company. I'm getting a bargain on. I think that that's player. Yeah I think that's an interesting point and I think we're seeing that as well as sort of intra industry opportunity cost and then inter industry opportunity at so. What are you seeing in terms of like you know the deal flow is mostly emergency deal flow right now is it. You know your portfolio. Like what are you seeing right now? Yeah Yeah I mean so I if you have a solid company. That's on good footing. You've got a good balance sheet and you know you're not going to market right now to to to sell your coming. There's just no way so. You basically have a pretty nasty selection biased right now of companies that are trying to get sold right and you know we. We opened up something called Safe Harbor. Which at the time looked helpful The the government has ended up. Just just hammering that program because you know our cost capitals way higher than than there's Unfortunately you actually have the competency to deploy it as like the DMV of finance. Have no idea how they expect people to. Spf programs actually deployed the capital. So they would you know. It's in all fairness I look. I've been I I I would. I would agree and I've actually used that exact line In the last month and I was really really worried about it to to the credit of the SBA and the and the banks We are seeing a lot more throughput and liquidity into the system through that program that I ever would have dreamed as a great and so I mean it looked again politics aside about whether or not it should be going through them It is and so the reality is how are they doing? And I'd say to be honest. They're doing doing pretty well. I mean we're we're we're talking to people daily who are gotten their numbers that are then you this. The bank with weight works as you apply to the bank the bank then goes to the SBA and gets guarantee code and As long as conforming loan that guarantee code holds. And so that's kind of your place in line and then you execute on the documents. Have you seen people get the amount that they apply for or how they because we've gotten a couple of people that we've been told the loans GonNa go through but we haven't been given the paperwork and there's two main question to have the first is what kind of consent do you need from your shareholders and your senior lenders if you have debt and the second is sure you got the loan but is it the amount that you thought you were going to get and I don't know if you don't have to answer yet. Yes so so. We're seeing that on the loans that the banks are taking liberties to to basically ask for different amounts of money than than what people are based on what they see in the documents and so this is again where depending on these skill level and the expertise of the bank can have a material effect on the amount but both positive and negative to be honest I mean I think they're trying to get it right. And they feel like they're on the hook for making sure they ask for the right amount of money so. I think there is some complication. There by understanding is that because it's unsecured and because it's one hundred percent guaranteed that you don't need consensus that sort of bypasses consensus of other lenders and so we actually have not seen that. Be a problem in that segment of the market yet. So again in general I mean actually I think that the program is working for what is designed for is actually working way better exceeding my expectations now. The next round just came out Announced yesterday which is this. Sort of the not forgivable loan but so one to twenty five million dollar four times cap on Amount that came out as it was part of the cares act as well but it's an execution of a different part of the cares act. That portion comes with a lot. More strings attached. I think is going to be interesting to see how companies react to that. And you've got another really interesting things so you know all these programs sort of an overlapping mosaic of a advantages and disadvantages have been type. Accompany you have right so that one that came out yesterday is you know it's all based so if you're not making money at least on the basis It really doesn't apply to you and so they're trying to target in some ways. Maybe I'm getting too much credit here but I think they're trying to target certain types of industries with certain types of capital. And I would just ask him. So what are you guys seeing in in VC? I mean is it. I know the Affiliation Rules Held Sto. That's created some some challenges. But but you know what are you? All seeing in the world on P. P. Program. Eric you WanNa go and then I'll go. I think it's too early. In terms of we're seeing startups. Russell is sort of the ethical implications ethical questions. Should they apply it? Is it appropriate for them? I haven't heard any startups Hear back from from that program yet and you. I hear that it's quite a doozy to to to make sense of in to apply in the first place We're we're seeing most of them apply Say Hey we were GONNA fire people if we don't apply and so you know the money's been allocated and we think it's appropriate. My philosophy is a job's a job's a job. If you're trying to save jobs I I mean I. I think that you know. There's an argument to be made about jobs. Should you save is delaying the inevitable? Which I think in some cases it is if there's a material downdraft in in long term demand and we think that the world's changed and sort of a sustainable way then just delaying the inevitable. But I think there are jobs that are you know. You're just running into a solvency issue which I think this does solve and and I think it's it's intended in in those cases to be that so I mean I don't have a problem at all with BC back started supplying for it. If it helps save the jobs that they attended safe. So I've seen some of those sort of moral dilemmas that like. Oh should you really apply if you don't if you don't need the loan? I think anybody who knows that they don't need the loan. Either has a lot of cash or feels that they're smarter than a virus like that takes a lot of confidence to think that you're smarter than knowing how a global pandemic end up and whether or not that audio and I think that if it turns out you apply for the loan and the pandemic is resolved and you didn't need the cash then you should use. The option have the ability to donate the money later to someone who really needed. It would have to ask for forgiveness on it. You could just one percent return the money. Yeah but but like make the decision later when you actually no-shirt because I know if I was an employee of a company and the CEO's like wow as sinus strains and like at a righteousness. I'm not gonNA take money. That was offered to us to keep a safer than we might. Otherwise be I'd be pretty annoyed. You know I think that their businesses are like wildly profitable. So like it's you know. I think I saw a couple of newsletters at maybe a hedge fund that has five employees in a billion dollars. Am sure and apply. Yeah okay I agree with that. But for most of our portfolio and is that like the back companies are backed by you know these ultra-rich GP's who are going to be rich one way. Or another no the capital is being invested by endowments and Pension Funds. And everything like that. And you know. That's the purpose of what this capitals. out there for demand went down. You can now print money without as much risk of inflation as normal because you have so many deflationary factors and the point to Brent's point is jobs a job as a job and you should take capital that the government is provided to us. Try to keep employs. I'm seeing a couple of dynamics in vcu right now. One is on the investing front as Ali mentioned. We're seeing deals other Deals that they tried to get in six months ago a year ago. Couldn't get into now. It's open you know just a little bit higher price or maybe the same price and it's like Oh my God. So there's some deals so it's a good time to investing at the same time you've are saying. Hey wait is going to be a better time to invest three months for now six months from now nine months from now are prices going to go back down significantly that of the that's one question people restaurant addressing you. How much dragged reserve and it relates to the L P front which is if you were fundraising you most likely post and the question is. Are you six three months from now? Six months from now nine months for now is going to be a worse time to fundraise to you to work with. Lp's than it is than it is now it was sort of. You're the devil. You don't know better than w know if the devil is quite quite bad Alliott what what's your take on. Abc's should should hell is west. You know it's The with humility and say that you don't know which is is could end up going three months or six months could come back. It could be so bad that we don't even know so you know we're picking her spots. I'm not going to deploy my whole fund this month but maybe when I see stuff that truly looks. You know unbelievable. Pull the trigger. I'm comfortable being too late than too early. And you know my job is to be a reasonable fiduciary of capital to my. Lt's Anna turns out. Like I didn't pull the trigger fast enough. But continue to have a three investment period in which a majority of the deals come in and valuations of stay lower for a while. I can live with that. I can't live with putting a bunch of capital out now and then four months later all being gone rent curious. How you guys are handling that. And I'm sure you know you're struggling with the same issues and bridges to add to that your question of. What do you believe about the world in six months from now twelve months? Now how does that affect your your work? Yeah I so. I think that we don't know and we are trying to have a high amount of humility. I think the work. We're constantly trying to triangulate and sort of calibrate. What we believe to be true but right now I mean. The the band of outcomes is just so dramatic that we we just honestly you know unless you have long term government committed contracts and even those I mean could be reshuffled I think the risk tolerance is just down a lot and I think rightfully so I mean we haven't really talked about. I mean the virus is one obviously. Heavy risk factor but. I think that it is going to be a more risk on environment regardless and I think that you will see world actors that Maybe have a ulterior motives trying to shake things up even further and trying to destabilize things. Taking advantage of those natural disasters will will still come. I mean we're not it's not like a nature takes pause on that stuff so I think that we're going to be set up. You know sort of more fragile than than we would overall as a system and so I think the all those things we're trying to take into account and at the same time not go into a hole and shut down the entire process. I mean we still have full team We have no intentions to lay off anybody. We want to continue to move forward on on opportunities and we're actively in discussions on a daily basis with with companies But I can tell you that are opportunity. Costs has definitely risen. And I think unlike these C. Which you you're seeing. You know the good deals. Kinda coming back quicker if you look at like a two thousand eight which I think this is materially different in many ways in two thousand but the lower end of the lower middle market really didn't reprise for about eighteen months and deals really didn't start coming online. That were I would say a high quality for probably three years. I mean that is that's brutal to think about right And so I think there is a danger that you you know. If you've been in the mode of fundraising look we. We just completed. A fundraiser of the timing was was fantastic and we have a ten year horizon on that capital. We're in no rush but we're also open to opportunities. I mean I think is how how we we sort of the Pasha were taking. The the issue is becoming. I said earlier selection bias. It's like if you have a great company right now and you don't have to sell for some reason you're just not going to. I mean you're not going to sell. I mean there's just no way and so and the government's providing sir the bridge Capital needs right now and so for us. We're just trying to watch and see and have good conversations. Build good longterm relationships be helpful on been proud of our team that they've really kicked into gear and tried to create content? That's helpful these businesses. How to cost? Cut a how to think about these government programs You know the finance teams calculators. And of course we've got our own fully of nine companies that were actively engaged with on a day-to-day basis and Some are lightly affected in some are more heavily affected. And and and it's rolling to. I mean we've got construction firms that I will have jobs sites. Shut down for a week. We'll have Down for a month For a day it's every every day is kind of a new day in being allowed him. What's not and so? I think that it's A. It's such an uncertain time right now. It is really difficult especially when you're trying to do longer term Majority of outs. It's just really difficult right onto execute on it and that's even without us needing to have a bank involved. I mean we're we're pretty much. I mean I I'd say the only one But in the private equity Probably the only group that doesn't traditionally US bank financing as part of our transactions. I can't even imagine trying to get a deal done right now. Intriguing banks attention to get a deal. Done like it's inconceivable and talked to a a buddy of mine who runs private equity Sort of all private investment for a large endowment and. He said he considered private equity. Be Shut for business and real estate. Be Shut for business. Yeah I I I don't know where. Vc isn't it. Sounds like Mr? Vc's maybe a little less shut. Certainly adding this idea of opportunity costs I think really matters and ultimately owners need to understand the Christ You know what sort of is the opportunity cost price. I mean we've got an AIRBNB taking on mid teens yielding capital. And you've got you know United Airlines taking unlevered planes and having low twenties yield on that debt. I mean it's just got to replace everything down down the market you know in in your World Bryant. It's it's GonNa take longer because companies have more companies have more optionality into there's more negative selection bias right if you need to be purchased. There's something wrong in venture capital. The default is you're going to need to fundraise and just fundraisers go better or worse. But you know Eric know in in our shoes I would say the companies. That are good. Aren't GONNA wait three years to go raise money because they can't very few venture capital companies can but as if they're good and they're raising now it was because something recent happened and they were midway through the race in the end the fundraise all apart and now they have to race and that those are going to be few and far between but the good companies are probably gonNA still to come out in the fall. They're going to put the brakes on it now. They're probably not gonNA even try to raise in the summer and like this fall is going to be really really good time to invest. Probably and you're going to have a ton of deal demand and they're going to have more capital demand and supply and of our us. I would just tear up for September and October November. There's going to be really really busy months but trying to do too much too soon right now just because you read a bunch of blog posts. It said you're supposed to be contrarian and buying the dip probably doesn't make sense and like I can tell you my calendar is pretty empty like if you were to look like usually my days like thirty minutes thirty minutes or eight minutes if you look at mccown or you might think I don't have a job and it. I'm doing that because one our companies have emergencies and I WANNA keep my counter opens. They can call me on my cell phone anytime and then I'm not trying to make myself busy. I know that it will happen. And so anytime Working on I'm watching workout videos. Tian say and I'm drinking Tequila and I'll come back to invest when things get better. Isn't that your normal life holly during our close super close but more countering by that actually is a good question to Ali. How what do you think How do you think coming out the other end of this? What you've learned Doreen just on personal habits like time usage. How do you think your life will look different as a result of this sort of more permanently or do you think it will at all so I have a friend who had this great line is like your keep telling people that like? I can't with that right now just with everything going on. Not that busy you know and and it was pretty funny because what he really meant to be saying. Is You do all the stuff that you get asked to do. You feel guilty doing it and we now all have an excuse to not do stuff and it's like a really believable excuse and it makes it so that we're all kind of actually opting in instead of like getting pulled in sucked into stuff so. I've been only doing things that I actually want to be doing. Having said yes knowing that I had the choice to say. No it really makes me wonder what my ability to say. No in the future will be so. Yeah I guess. Time has brought a lot more time with our portfolio companies and I'm loving it It is really fine. This sort of Get under the Hood Morris of doing everything in twenty minute increments and also finding myself talking to people. I haven't caught up with a while just having time and I was gonna say that's the same thing that I've been experiencing is just Y- having a more open calendar and less sort of busy stuff that I've been doing Has Really opened me up to have deeper conversations and be able to like linger when you should linger and I think not being rushed to go from one thing to the next I really hope that I'm able to keep that. I mean we'll see when when life comes back snaps back. That looks like it. It's definitely given me given me a hope that that maybe I can eliminate some of the hurry from my life that I think that had crept in And also I eat so much better now that I'm not eating out. It's incredible Qianjiang Thirty Diet. You'd be like wait for months ago. I just want her so bad. When you when you have a full calendar every you know every bad meeting too long and every good meeting is too short. Yeah and as I mentioned it does have sort of this hell. Yes or no dynamic of Of of really being. I thought I was going to have to have kids to be able to have an excuse to get out of Get Out of stuff. I've just made it up. I just tell people I have kids but now there's much easier reason but it allows me to to linger a as you mentioned you mentioned earlier. This is different than in two thousand eight. Let's let's a step down there. I'm curious if I was there jurists because you know some people say things like hey. Our ECONOMY WAS. Structurally sound as soon as this gets back to normal. We'll have some sort of recovery. Some people say hey even if our economy was structurally sound you can't just you can't just pause for two months and go back to the way things were before assuming we use the viruses contender or or or doesn't flare up in a way that causes us to separate again and other people say we were actually Our economy was not structurally sound. And something like this was going with a virus or something else was needed or was going to happen to sort of reset. Who is your stats? Yeah I think this this is Made mostly of our own choosing and by the way if you hear screams in the background. No one's dying. It's just a I have three girls under six so I actually have have kids. And the only way he's got a recording in the background actually just like a radio. Exactly different pitches covers as a getting on so like I think i. I made a comment in one of the pieces. That Britain did It feels like a combination of prohibition imminent domain is kind of what we're going through right now and I you know I am not smart enough. I'm not a macro economist You know I I don't know what what Zia phrased Economists were created to make astrology. Look legit by you know I. I'm not smart enough to know sort of all the underlying reasons why something could go wrong. I can tell you that the situation we're in now. We had a pretty good beat across our companies on the economy and economy. Going INTO. A march was fantastic. Things were going well. Demand was fantastic. The labor markets were really really tight. But look stuff was getting done and It's just gone off a cliff. I don't know I don't know what to say. I mean it's not like this is a It's not like people over levered. It's not like there was some contagion. The manmade contagion right that hit the market. I mean this. This feels like we are in a situation that it's it's much closer to natural disaster but it's just a natural disaster that's hitting the world all at the same time and so in terms of the recovery out of it and the. I don't think there's a playbook coming out of this thing I think that there is GonNa be just a material difference in certain types of demand when you having government say standing in front of you saying don't get close to people don't travel You know it's going to take time. If everything will say we create a vaccine and everything returns to normal quote is GonNa take a while for people to this. Earth had that muscle memory You know go back to something closer to what it was four. I also think it has shown that there is a lot more latent risk in the system than a lot of people were seeing and so my guess that savings rates Sort of increase of risk tolerance decreases just in general and I think that will ripple through the economy. I mean if you're if you're a business owner in you say you know I could buy that piece of equipment but I think I'm GONNA buy using set of New Right. I mean that that has you know. I'm GonNa fix stuff that I have. That maybe is not optimal. I'm not going to hire those two extra people that I think I could really expand. Just we'RE GONNA WE'RE GONNA be a little leaner you know. I think those things in general Do have an effect on on the economy. And I think that we're headed. You know my best. Guess is that or we're headed to rolling lockdowns. I think until we have a vaccine And I think those rolling lockdowns will be by geography. I mean the United States is so big. And you can't you can't you know sort of is not a monolith right. I think there's going to be you know rolling lockdowns in large cities or regions. And then until there's a really effective therapeutic until there's vaccine I think that we're in this weird no-man's-land last for eighteen months two years. Maybe even a little bit longer And I think that's the new normal that we're headed for is a sort of in general. Broadly decreased demands just based on those sort of factors you know sort of lowering productivity than higher savings rates. I think will ripple through most everything there are going to be you know. Call it five to ten percent of businesses that get a tailwind were serves largely unaffected by this but I think the vast majority are going to feel it in meaningful ways yet. I think also To that point you're gonNA see a lot. More companies set themselves variable costs. You know as much as they can. So you're seeing the resiliency of ECOMMERCE right now or a physical retail. I think people are going to really decide that they need to store to sell. Stop stuff you know. I think that may never change or that will have changed. Never going away. I agree with you. I don't I don't know that this is like a going back to normal but I do think it's also important. I kind of think about like what if it does you. And just sort of have the playbook for each part you know what if things go really well and have that playbook what if things go really really badly and how that playbook and just lean into the. I don't know factor. That's what we've been out of the all of our companies we have. We've encouraged them that that you know what are plans for. X. Decrease in revenue Y decrease in revenue. What are the trigger points based on? How long this thing goes so that everything's mapped out ahead of time. So you want to think about it. You've already served given it. The calm thought and then coming out the other side of this thing is exact same. It's you know. How could we essentially use this crisis for good to consolidate you know talent that we never thought we'd be able to access to some? You know whatever those may be. I think those things on both ends you know on the way down in on the way back up Look important to build a plan out with the humility that you just don't know yeah the the other you know. Kpi that I think has come out of all of this. Is You know when you're thinking about what you're going to tear back on and come to spending you know what was the value all the stuff that you pay so like one of the. Kpi's that I always. I always tell people like my iphones. The cheapest thing I own because like I paid for it compared to how much I use. It is unbelievable and then like you started thinking like cheese. Spotify Relatives Utility. How cheap is net flicks relative utility? How expensive car relatives utility and he started thinking about this sort of utility verse. Spend you know an especially when you start seeing also parts of the ecosystem that really gets affected so no you start thinking about consumer demand. He even consumer lending subprime people looking at me. Like wow that if rates and subprime we're going to get really high the realities. They've already been really high. You know and and the sad reality is for subprime and deep subprime. Life's a recession. You know and then for super prime. They're probably going to be okay. And it's a bunch of people who are sort of sitting in the apartments and getting delivery and are feeling okay about it Maybe with a deep sense of Gil which is I definitely feel deeply guilty about the what. What's going on in the world and the fact that were killing are safe and everything like that and it but the people that are GonNa really effective people in the middle is the people who are good borrowers. They're good spenders and spend their whole life following the rules even though they're kind of hanging on the edge and they're the ones who are gonna be making sort of significant changes So when you're thinking when when we're also looking at our demand and the revenues and the customers of our portfolio companies you know. The first thing we did is we said. Please send us a list of everything on your customers. Broken down by the industry. They're in like all your customers in the travel hospitality space. That'd be really bad are they. Smb's that'd be really badly financial services institution that wouldn't be so good and then understanding of those which are the middling credits because the good credit standing credits. The Bad Credit Suisse say the bad credits. It's the middling ones that are sort of worrisome to lead. I think it's interesting. Analyze consumer behavior and also enterprise behavior in terms of. Are they going to freeze new business expenses? Are they going to embrace new ones? That are cutting costs in a way that they wouldn't have before an enterprise sale will probably be hit harder than consumer subscriptions Because I don't keep people train off netflixing spotify right now and spotify networks are not going to give you a discount like they. Just don't care enough about you but I know that. Like for all of the enterprise offer that we use. We're getting pretty good. Discounts or portfolio companies getting discounts and people are trying to take care of their existing customers. So we'll see I think. Different companies will be sucked in different ways and anyone who thinks dancer. I am excited to had a predictions. The I think that the the might end up being sort of a long lasting thing is digital community as being much more important than in the past. I think it's been sort of an augmentation of real life community in person community. I think these digital communities that are being formed. I think you'll see a lot more of these form that will enable a level of intimacy and and true community that. Maybe you haven't been there before I'm actually excited about that part You know prior to this. I was not a heavy zoom user. I used them a couple of times and I gotta be honest. I mean I think we might travel less in business just in general I mean. I think it's still signalling mechanism to show that you really really care. And then it's you know relationships important but I think that the actually utility of it. You can bypass a lot of that and use sort of digital tools in a way that could create a lot more a lot higher productivity. I mean I think it has odyssey implications on certain industries but I think in general could be really useful. Thing long-term yeah. I'm a little nervous that how many digital communities are gonNA exist. I remember like I already overwhelmed. With how many telegram groups I was in and like that. Like Crypto telegram groups. We're really mania. And I. I don't really need more channel and I'm already been like there's already like a couple of zoom groups that have now formed. And like you know I they're cool. They're they're really cool but it is a lot of content. The challenge is saying that you can't hang out like I don't know if you guys have experienced this but sounds like hey do you want to zoom later and you're like I'm available but you know I kinda wanted to read at another really hard to get stuff right now in a weird way? Socially just your kids. Yeah no like I was talking to a friend like I was about to say. I have to go and it has to go. I just wanted to go. It's like as I came in like it's GonNa be pretty bad. I'm putting out of stuff to say. Just GonNa go watch. Tv Let's let's let's LP's a little bit. I feel bad for absent friends right now. Who are trying to. We're trying to raise their first venture fund when Goget hit and if you were trying to raise a venture funds Bishop Microphone Twenty Nineteen. That was like the best time. Ever in only microphones got off the ground. But now I mean you know on the dom inside your they were already over allocated to venture to illiquid portion. You know they're getting crushed and you universities. Obviously don't have students. Their students are now realizing paying all this money for zoom calls that they don't even want to be on in the first place parents seeing them you know at home saying hey why are we paying all this money. You are cost reopen the fall. I don't know so that means they need more money for for an L. P. market their shot. If you're trying to raise a fond right now is a really bad idea to call people. You'RE GONNA get a no and you might as well wait a few months and then reopened fundraise because like a maybe later better than a pass. So if you are raising a fund right now is because like yours your special and so. I'm sure that the funds now it's like a another fine if it's a rea- per if you're looking established firm people are going to invest. They'd rather you wait. But they're going to do it because they know they have to. If you're an emerging manager I. I would strongly discourage it. The other thing that's happening especially for endowments or anyone who has down type model or they have buckets is your equity just got crushed. You need to rebalance and so. Let's imagine you one hundred dollars of staff you know of of money and you used to say well I want a certain percentage of inequities you now have all of a sudden like if you had. I don't know forty percent equity thoughts call it. You know how thirty percents equities and so you now need to take the money out of other stuff and put it in equity or if he used to always want sixty percents or above to be liquid and forty percents of the private. If you're liquid book just got mark down but your private market in that. He had to take money out of the private market and put it back in the public market. You're targeting goals so not only are people not wanting to invest because it got hit and there are reticent nervous but it's also that they're having to re bucket into things away from you and you're just too many too many headwinds for no luckily probably markets have a lot of dry powder. But yeah I mean I think also how behavior you think is gonNA is gonNA rebound here and six months to twelve. Months will also affect how handled the dry powder that they currently have. I mean that's one of the things that You know when when this thing all started hitting we call all of our OPEC As and said Hey I just met you know verify. You're still with US right. And we got resoundingly. Hell Yeah and in fact. We have two larger Lp Say hey if you've got stuff that comes up as a result of this you know we'd be willing to put in more that those are the types of LP's that I mean we obviously selected for heavily An officer the long-term vision a lot of the people that we've talked to that are on the side. I mean as always I mean it's it's just shut. I mean there's just no way that they're gonNA be doing new commitments right now. If you think about all the factors why most shot right now is sort of a an echo up the chain of of of why they're being shot you know the same. I mean they're dealing with triage the same as everyone else meeting your you'd better believe. Lp's are being active in the in the folio their GT's trying to help triage understand where you're gonna try to you know. Put your capital. Save some of these companies as well. I think those are discussions. And maybe if you've if you're raising a first time fun and you don't really understand. Those dynamics is going to be hard for you to understand why you reach out there saying. Hey I'm booked up. There's no way in so I think you know again. How risky where where do assets flow in a in a risk environment I think that's interesting question. I think that again I. I'm not smart enough to know that but I think it does have implications of how quickly will some GP's deploy dot knowing that it may be hard to raise no matter what their track record is on the back end of that totally? Let's not spend the next ten minutes. Talking about predictions are cer- certain industries. That were excited to see different different different. Transient acceleration. I've to One is One is a something that excited about another. I'm less excited Of curious about I is education. I invested in Homeschool Company. I invested in Daycare Company. I think you sort of shift from K. To twelve to do something new or shift from university to do something new is. It's wildly expensive. I think is is accelerating quicker because of this and I'm excited to see entrepreneurs create solutions to solve that Song. I'm looking to To invest there and not that it's an university. It's not that bad. It's just that it's it's way too expensive and people taking on too much debt of and so that that space. I'm really excited to see or solutions. I think when space that I that I think has not performed as well as it should have is ripped up is bitcoin. I think you'll be. Hey you know. This should be a flight to safety in these type situations than before saying. Hey Not for these type situations but for others Nations but then it with the Fed printing extra dollars. I think people are sort of understanding. You're learning about geopolitics and how strong the dollar is and how they can effectively get away with it in a way that doesn't seem to impact Bitcoin Bitcoin Preisinger or Brooklyn prospects. And so I wonder what that means for people's Understanding of of on Bitcoin. I'm super bombed by performed and I don't really have. I guess I don't really have an opinion formed other than you can do. It was supposed to do and that the government has shown that it's probably a pretty useful thing You know it's probably pretty good. That like the government told everyone to go home and has five pretty good that the government made a venture loans to people and monetary policy is important because when you see deflationary events occur. Then you know that you can go print money and like I didn't really have like a positive or negative Steve Nation ahead of this. Like I think he's done a pretty good job. And you had the benefit of you know seeing Paulsen fight really really hard to get all the stuff done before and I don't know I feel better about having government than not having won the second is you know. Were really focused. So I think a lot of you know. Investors are saying okay. What changed the world. That's going to stay the same after all this is over and I think one of the things we're trying to stay away from is avoiding any deal where because of the pandemic the revenues are up and they're like wow we're like SORTA countercyclical. You're not countercyclical like a pandemic cabinet. This is like weird that you're good at being remote you know but this is like a countercyclical investment that's like a pandemic cyclical countercyclical investment. I said those deals aren't really that attractive to us because at the end of this they're going to really big bump in Q. Jail and then they're gonNA go back to being normal mediocre companies always work I do think that there's certain things like. Yeah of course stimulants like I think Landis schools probably pretty happy about best I think income share agreements are gonNA get fucked and some are not in those zoom will probably matter and we have you know killing. I have really close friends in Atlanta that we almost never talked to or at least I almost never talk on the phone and I am and we're talking. We're hanging out with them every weekend now so I think that's really cool. You Know Brent. I bet you you feel like even better about not living in New York now. I think that you know it's really say commercial. Real estate probably won't come back in the same way. I don't know I bet you less undergrads are GonNa let graduate from college and say not really wanted to New York City in San Francisco so I you know I don't have any like really groundbreaking things other than if anyone sends me one more deal that tells me like gotTa have this portfolio companies doing amazing because pandemic. You should totally invest. I'm not interested in that I'm interested in companies are going to be good in good times bad. Yeah Yeah I would say the. The thing that I'm interested in is telemedicine in how that comes out of this so one of the A friend of mine Runs a a local group that he's been trying for years to work on state licensure type stuff? It's really difficult. I mean you have to get licensed every state practice medicine. They're the argument. Is that you know the Texas. There's something about you know practicing medicine in Texas. That's just fundamentally different than practising medicine in Wisconsin. Right and you've got to have local knowledge to know and you gotTa make sure that no the people they're practicing in Texas no no Texas people. As if they're different than than Wisconsin. I think a lot of that. Bs is going to go away. I mean one of the things I'm really hopeful for is even beyond telemedicine that a lot of this state licensed or stuff just tapped braided hair to do whatever a lot of this stuff gets opened up a scene for what it's always been which is to try to protect incumbents and hopefully we just clear cut a whole bunch of that garbage that that has been impeding up for the most part the poorest entrepreneurs amongst us from being able to businesses just a giant tax on small businesses. So I'm really hopeful that that's gonNA open up and specifically Intel medicine. I mean I think there's so much stuff that we do. We've done previously like urgent care. Type Type Work Buddy. Mine's a good friend of mine's a doctor. And he said he before this he had done. Maybe one or two telehealth visits if you WANNA call In his entire life and now he's doing ten of day you know and he said actually a lot more productive by clients. Don't have to drive to and from. We don't have infection issues within the office I think there's a lot of benefits to it and so I'm pretty bullish on that there'll be a whole crop of organizations of pop up that can provide a a sort of metal layer of truly fantastic health services. You know through your phone. In essence I think areas that I'm sort of I'm interested to see how they play out are really heavy asset industries. I mean this is sort of going into bad as far away from Tekken. Vc for the most part is you can. But I am curious. You know if you can take the aviation industry. I think it has incredible consequences up and down the chain. If you have a sort of fifteen percent let's call it. Material and sustain difference in air travel yesser taking air freight out of it It has implications up and down the supply chain. You know how often these parts are being produced by by companies. I think there'll be a lot of e shes that are created as a result of it but I think it's going to be pretty damaging to these large companies have his incredible infrastructure footprint. And and. So that's another area that we're watching pretty closely right. Now is pretty. Heavy asset a type industries and companies Heavy manufacturing things really interesting if you the margins have have never been great there but if you take out ten percent demand I mean. These companies flipped from being moderately profitable to being wildly unprofitable overnight. And I think that that's where some of these things are going to shake out. I think everyone's GonNa get haircut depending on what the industry is an WanNa come into the digital communities I feel like it's opportunities for really new social experiences like some people are saying imagine of Chat Roulette had come out in this era? I I worked on a video startup in a two thousand twelve. That would love to see Sarah game show type dynamic the you know this should be a golden moment for virtual reality. It's it's too early tech perspective but it was a few years later. I mean people are people are bored looking for new ways to connect and new ways to sort of Your share experiences. Now if you have kids at home you're not board but with that is actually interesting. I somebody the other day on twitter mentioned that they said there's like this big bifurcation right now if you have kids. You're like working. You feel like you know. Eighteen hour days right. You're going to start as you can all day long every day. And if you don't have kids just bored as hell so ironically online poker later tonight yet. Zaire Eric Online poker later tonight. One by Brent. He can't make ads like event. That's a perfect segue Ali to go back to see his kids and Lebron's vacant shore permanent equity and Alliott medical venture guys. Thank you so much for on the PODCASTS. You're an early stage entrepreneur. We'd love to hear from you. Check US out at village global dot BC.