YoungStartup Venture Summit Virtual Panel Discussion
May 5, 2020 - The Changing Venture World: What Can We Expect for the Next 24 Months?
Venture Capital thought leaders debate the challenges and opportunities facing both Investors and Entrepreneurs. Moderated by David Sorin of McCarter & English LLP at the Venture Summit Virtual Connect.
Following is an excerpt from the virtual event and thoughts shared by Dynamk’s Daniella Kranjac:
Thank you so much, David and Venture Summit West. Daniella Kranjac and I am a Founding Partner at Dynamk Capital. We are a Life Sciences industrials focused fund for venture and growth equity. Our core thesis and core investment strategy has not changed given COVID-19 - we are entirely focused on the fundamental tools, technologies and services that underpin biopharma in terms of discovery development and manufacturing of therapeutics, vaccines and diagnostics. We see life science industrials as a very resilient place probably one of the most resilient sectors this particular crisis and in terms of advice to those seeking capital now, we believe it’s an opportunity for entrepreneurs to re-calibrate. We would underscore the need for a revisiting of business plans and assumptions, can you reach customers, what is your sales cycle is going to look like in this changed environment, and don't leave any stone unturned it's a real opportunity to take advantage of this crisis.
Effects on Funding Relating to COVID-19:
We are serving a gap in the funding landscape with our fund as an essentially an underserved part of the industry which are the pics and shovels of Life Sciences. With respect to our specific industry, certainly we are seeing some headwinds but also tailwinds - both from COVID-19 related activities with regard to research and development of diagnostics, therapeutics that are necessary for treatment as well as potential vaccines that are necessary to fight this. On the converse, we still we still have cancer as a leading cause of death, diabetes, heart disease - those are not going away, so our industry is rather certainly feeling some of the effects from some of the clinical trials and laboratory research that has been temporarily upended by this crisis, but at the same time we know that the recovery will happen.
We have ridden through this before and we can see what has happened in past crises and how recovery has tracked over time. Leading up to this year, within our industry there have been a lot of rounds being raised for 18 to 24 month runway - most of the companies have been successful in doing that, some that are caught in the middle. I expect we will see a trend of more venture debt, more bridge rounds, insider-led rounds to sort of bridge if things are being supported by the investors around the table - that is our primary role at this point to support portfolio companies. All in all, we see some translation to slightly lower valuations in some cases at this point, and more attractive investor-friendly deal terms being offered, which is refreshing. On exit multiples, we can have that discussion as well but that will be highly sector-specific and strategic acquirers in our sector will still be willing to pay for valuable and highly strategic assets.
On Strategy or Sector-Focus Changes Relating to the Current Environment:
We are obviously a very niche focused fund in life Sciences and healthcare so we are not looking outside of that but for us this environment translates to a couple of things - we see this as a catalyst for a lot of opportunities that have not really yet fully matured: A.I. for clinical trials to speed development and manufacturing automation, personal medical devices monitoring and virtual medicine, but for us specifically it's translating to some other opportunities including consolidation plays, growth equity plays.
On Investor Value-Add that Focused, Experienced Investors can Bring to Portfolio Companies:
At Dynamk our entire investment thesis is founded around being more than just the capital, so we are living and breathing that on a daily basis. When you look to our team experiences building companies during crises and living through those crises as entrepreneurs and as strategic acquirers, we have a deep understanding of what they are facing on their end as startups. I think this is what our companies are looking for in addition to the capital: the recruiting support, the strategy development, the access to key customers, how to position themselves in a changing market and what the exit environment looks like for them, in addition to sound counsel to weather the storm. These are really key points and we seek out those companies that really want that advice so that's part of our mandate.