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Keep Calm and Carry On Investing

Around the beginning of the last global crisis, the Global Financial Crisis of 2007-2008, it was widely predicted that entrepreneurs would stop founding unicorns and venture capitalists would cease investing.  The belief was: the startup industry as a whole was about to experience profoundly, and potentially permanently, negative results. The prophets could not have been more wrong - in the four years following the GFC, founders created more unicorns than in any comparable four year period in history. 

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Number of Unicorns Founded by Year (2005-2018) (CrunchBase)

As most of us are aware, the global financial crisis gave birth to what we now call the "Shared Economy".  Massive value, in the form of now-household names like AirBnB, Bolt, Careem, Didi, Gojek, Grab, Lyft, WeWork (and the dozens of similarly-styled shared workspace companies that have sprung up around the world) and Uber - and the super-app-powered delivery services that now sit on top of these massive networks - was created not in spite of, but *because* of the global financial crisis - and the investments that VCs continued to make during the downturn.  

Psychologically, in the autumn of 2008, it did look unlikely that any good could come from such a bad situation.  Back then, the problem for most consumers was, simply put, cash - or lack of it.  Hardly a great time to choose to start offering a new product or service.

But as often happens in a crisis, consumers adapted.  In 2006, no one was looking to rent out the spare room in their house, or offer a total stranger a lift in the family car.  However by 2009, many households were in a bad position cash-wise, and in need of that extra income.  The models that arrived to fill those needs have now evolved to the point where this new shared economy has not just taken hold, it has taken over - and created billions in value for investors, and a new level of convenience for consumers.  

The current crisis is different - and the threat is profound and being felt by everybody.  But just as there were last time, the naysayers predicting extended (permanent?) negative effects are wrong.  Humans will evolve systems and tools to cope, and some of those solutions will transform the way we live, and go on to become popular components of everyday life.  As investors, we have a duty to fund these solutions.  And if we're lucky, those investments will result not just in happier consumers, but in the continuance of reliable, long-term returns for VC.      

For now, we at Hatcher+ humbly suggest that we should all make our motto: Keep calm - and carry on investing.

Sharp
John Sharp
Hatcher+

John is a serial entrepreneur and investor, and the Founding Partner of Hatcher+, a next-generation, data-driven venture firm that utilises a massive global database in combination with AI and machine learning-based technologies to identify early-stage opportunities in partnership with leading accelerators and investors worldwide.