FINANCIAL INSIGHT: VENTURE CAPITAL understand what the business will look like post pandemic.” Not only that, startups should also expect the fundraising rounds to take longer than the usual investment process. For instance, Daoud explained that they’d prefer meeting startup founders in person to assess the ones they haven’t previously known or heard of before. “As a result, our investment process may take longer than usual. Founders should be prepared for longer timelines as investors build the comfort they need to back a new team,” she added.
RWDC nabbed $188.42m in series B funding whilst Circuit Breaker measures were in place.
Funding rounds intensify as crisis adds up to VCs’ woes Investors are expecting a bulk of changes in the ‘new normal’, which will make it more challenging for startups to secure funds amidst uncertainties.
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uring the first five months of the year, some of Singapore’s startups still managed to clinch investments despite trying times. One of the latest and notable movement on this scene is involves biotech startup RWDC Industries, which just closed its series B funding round of $188.42m (US$133m) from Vickers Venture Partners, energy and resources company Flint Hills Resources, CPV/CAP Pensionskasse Coop, and International SA. A few weeks prior to that, early-stage venture capital fund Accelerating Asia closed it latest accelerator programme, awarding startups $225,000 each including iFarmer, Numu, IZY.ai and Priyoshop. But despite these positive developments, more difficulties lie ahead for those looking to close funds as venture capital (VCs) firms have added a new criterion to their investment mandate—“what kind of impact will COVID-19 have on this model or service?” “How they answer will dictate whether an investor commits now, or waits until the pandemic passes,” Justin Hall, partner at Golden Gate
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VCs are currently focused on advising their portfolio companies on managing cash flow, and supply chain or demand bottlenecks.
Ventures, told Singapore Business Review in an exclusive interview. Some VCs are also applying revisions to their investment theses. One of them is Monk’s Hill Ventures, building a thesis and conviction based on how consumers and business behaviours might shift amidst the “new normal” after COVID-19, shared Michele Daoud, partner of Monk’s Hill Ventures. For specific potential investments, Monk’s Hill Ventures stress-tests a company’s thesis during the downturn and goes back to first principles to question the startup founder’s underlying assumptions. “We take the time to understand the founder’s rationale for raising capital now, as well as whether the capital will be used for survival or to capture growth during COVID-19. We also look to understand the business model’s dependence on future capital raises and what the path to break-even looks like,” Daoud added. “We build various scenarios as to how the potential investment may play out given different recovery scenarios, and work with the entrepreneur to
‘Raise to survive’ Even though there is a lot of startup movement going on and VCs are still looking for startups to invest in, VCs strongly advise startups to focus away from top line growth and to focus more into profitability and extending their runway. “VCs are currently focussed very much on advising, hand holding their portfolio companies in managing the cash flow, supply chain or demand bottlenecks. If startups can survive this demand and supply shock, VCs believe that they can grow and raise capital at better valuations in a years’ time. Reducing the portfolio risk by active management with the companies is one of the important functions currently for many investors,” vice chairman of Business Angel Network of Southeast Asia (BANSEA) Ramesh Raghavan said. Monk’s Hill Ventures’ Daoud adds that capital management, rainmaking ability, and a heightened sense of urgency are critical survival tools for entrepreneurs so that they can roll out plans based on different scenarios, optimise for underlying capital efficiency, and pave a path to profitability without relying on new external funding rounds within the next 12-18 months. “Founders and CEOs need to adapt swiftly and over communicate with their teams to protect their employees and ensure smooth business operations. It is critical for them to be decisive and adopt flexible policies whilst keeping close tabs on their different markets and