Fundraising in time of Covid-19

    Written by Juan Palenzuela, Associate

    Edited by David Gaffney, Partner


    Good morning, As governments and central banks rush to provide as much liquidity as possible, one specific segment of the economy has a unique set of worries: startups.


    Some of them have started wondering how they will cope, as many venture capital firms set aside cash to help their own portfolio companies navigate the pandemic’s disruption. Few startups have use for paid sick leave and small loans, some of the measures announced by governments around the world; these are companies that planned to scale up rapidly this year and populated by freelancers.


    Their fears, however, are probably being blown out of proportion. Last week, Axios contacted nearly 40 American VCs, finding that all of them are carrying on with their business as usual, albeit from home. "What else are we going to do all day stuck at home except look at deals?". The sentiment is similar in Europe. In an interview with Sifted earlier this week, Evgenia Plotnikova, partner at Dawn Capital, emphasised how they are still “open for business”, adding that Dawn’s portfolio companies have raised nearly $200m just this week.


    On top of that, some investors have started opening their network to distressed startups, in the hope of facilitating funding. Yesterday, six global VCs joined forces to launchOff The Record, a non-profit that will provide exactly that for startup founders. Lauren Grill, meanwhile, a lead investor at Luma Launch who was one of the first VC investors to offer this “matchmaking service”, told TechCrunch that he has received responses from 400 investors so far.


    But that does not mean that there will be no impact on startups. While the best companies will hopefully still get the funding they need, those that need a few more months to prove themselves are clearly at risk.


    The government could step in to help. One way would be by borrowing a technique from the charity sector and offering match funding grants: show that you can raise money from notable private investors and the government matches that with a grant to the agreed amount.


    It’s important government and investors aren’t tempted to overlook future successful businesses that sit outside established sectors. It’s pretty clear that innovation, groundbreaking methods and ideas are exactly what we need more of in the world right now.


    News

    A new fossil discovered near the Belgian-Dutch border belonging to one of the earliest known examples of a modern birdhas shed new light on how birds survived the asteroid impact that wiped out the dinosaurs at the end of the Cretaceous period, around 67 million years ago.


    Train services across Britain will be severely reduced from next week, the government announced. The measures were agreed together with the rail industry, and will be gradually introduced from Monday.


    The pressure is mounting on Bernie Sanders to suspend his democratic nomination campaign. The senator is due to vote today on the latest coronavirus measures in Washington before retreating to his home in Vermont over the weekend to consider his next move. His campaign suspended new advertising and fundraising efforts on Facebook yesterday.


    Business and economy

    The chancellor, Rishi Sunak, is reportedly preparing to announce further stimulus measures including an employment and salary subsidy package to avoid the loss of jobs. According to the BBC, talks took place last night between the government and business groups and union leaders, who have repeatedly urged the government to help pay for wages amid the crisis.


    In an unexpected move, the Bank of England cut interest rates again to 0.1% from 0.25% in an attempt to avoid a wider financial crisis and support the British economy. It is the second rate cut this week, bringing the rate to the lowest it has been in the history of British central banking. The Bank also announced a new quantitative easing programme, with plans to increase its holdings of UK government and corporate bonds by £200bn with the ultimate goal of lowering the cost of borrowing.


    Supermarkets and their suppliers have begun taking steps to ensure they remain stocked during the crisis. Over the course of the week, most large chains have announced drastic cuts in their product range, to instead focus on the production and distribution of core products. Competition laws are also being relaxed so that stores can share data on stock levels and coordinate deliveries.


    Columns of note

    In light of the recent cancellation of exams,Phillips Colling argues that we should abolish GCSEs altogether, forever. The situation is an odd opportunity for students, who now can resume and focus on their education rather than preparing for an exam on a narrow fraction of what they learn.


    Writing on the FT,Christine Lagarde says that the ECB will do anything necessary to counter a recession due to the pandemic. In particular, she highlights the use of quantitative easing as an important tool in doing so, saying that the ECB has already begun increasing the size of its asset purchase programmes.


    Source: the New Yorker


    Markets


    What happened yesterday?

    Equity markets around the globe remained anguished amidst the continuing crisis, but markets in the UK and mainland Europe finished slightly ahead yesterday as investors welcomed the measures taken by central banks, including the revival of quantitative easing.


    the benchmark Stoxx 600 was 2.91% higher to 287.80, alongside a 2.0% rise for the German Dax to 8,610.43, while Milan's FTSE Mibtel was 2.29% higher at 15,466.97 as it closed.


    In the UK, meanwhile, the FTSE 100 ended up 1.4% at 5,151.61, while the FTSE 250 fell 1.37% to 12,829.70.


    What's happening today?


    Interim dividend payments

    Aquila Euro

    City Lon Inv

    Empiric

    Gresham House

    Samuel Heath

    Invesco Perp UK

    JPMorgan Elect Managed Income

    Murray Inc.tst

    Seneca Glbl


    AGMs

    Blackrock Brna

    Oxford Biodyn

    Pantheon Res

    Shanta Gold

    Spitfire Oil


    UK Economic Announcements

    (09:30) Public Sector Net Borrowing


    Int. Economic Announcements

    (07:00) Producer Price Index (GER)

    (09:00) Current Account (EU) 

    (14:00) Existing Home Sales (US)


    Source: Financial Times

    Parliamentary highlights

    House of Commons

    No business scheduled


    House of Lords

    No business scheduled


    Scottish Parliament

    No business scheduled