Its pretty clear by now that COVID-19 has drastically impacted todays business practices and work lifestyle. ACRISIL Surveyconducted in May and June revealed that 90 percent of private equity and venture capital investors estimated a drop in fund-raising activities over the next six to 12 months on account of COVID-19.
A recent report on COVID-19 and Antifragility of Indian Start-up ecosystem by TiE NCR and Zinnov states that 52 percent of the start-ups interviewed were struggling to raise funds. There was a 48 percent decline in funding during April-June Quarter.
However, VC funding or debt funding has not completely come to a halt. The TiE NCR and Zinnov report states that investment showed considerable recovery in the July- September quarter; however, early-stage investing is still lagging. This year, Enterprise tech, education, Fintech and Medtech have been leading in terms of investment.
There are instances wherein few of the VC funds and debt providers although there has been a decline in VC investments, mature companies have been at a good place except for the ones who werent evaluated pre-COVID.
In these extraordinary times, for any business meetings or deals to mature, it has gone through a must medium - video call. Video call culture is a norm for business in this New normal age. Earlier when deals of million dollars were evaluated after several meetings, visits and sealed with several handshakes, today they have been reduced to email exchanges and video calls lacking the personal connect of the pre-COVID times.
Today one of the key questions that investors are trying to answer is -- How do you invest without meeting the team in person or without visiting their production facility or workspace?
Similarly, for the investee, the question is- How do you demonstrate your capability or choose the right investor/lender without having met in person?
These questions arise as the ways of establishing familiarity or trust over formal and informal exchanges during in-person professional meetings are absent.
As Stephen Covey, a renowned Management Guru, puts it, When the trust account is high, communication is easy, instant, and effective.
Trust is built over time with both verbal and non-verbal cues such as ones body language vibes during communication, eye contact, through seeing or understanding the environment in which the other person operates, shared interests, and experiences.
However, new mediums of communication and connect require adapting our ways to make those judgement calls.
The investor and investee both would like to evaluate the following levels:
Transparency- Have you done what you say you do?
When meeting on video calls for a pitch, both the investor and the investee need to provide detailed, clear, and verified information. This will, in turn, lead to faster trust-building.
It should also be mandatory for both the parties to have a verifiable track record of history and verifiable evidence about the future projections. Any hesitation or delays in sharing the information requested is likely to hamper the trust.
The information requests have become much higher in these times as investors and lenders are looking for different ways of triangulating the information in the absence of any physical inspection. Keeping MIS updated, and letting the investors/lenders come to the same conclusion from different sources will be critical.
E.g. revenues can be evaluated from the order book, profit and loss account, debtors balance, GST records and bank transactions. If these are made available with ease, and least follow up can lead to building a reputation of being transparent which goes a long way. As reputation travels along with the ecosystem.
Reliability - Do you do what you say you will do?
Does your past performance reflect that you most often do what you say you will do? This will be demonstrated in how you have achieved your business plan goals, and in case you have had to pivot, your investors/lenders knew the context and the reason behind it.
This is about execution; it is about reading the current situation and having a hypothesis about the future. The certainty of your communication, both content and frequency will go a long way in building lasting partnerships.
Commitment - Will you do what you say you will do?
During the discussion, both investor and investee should be confident that they are capable of carrying out the tasks being promised through the deal. There must be extra caution exercised with commitments and claims by setting the right expectations right from the first group call.
Under-committing and over-delivering has never harmed anyone. Do not give out that term sheet if the deal is not likely to meet your internal benchmarks. Similarly for investees do not share a plan which you know you are not expected to achieve.
Reputation - Will other significant stakeholders vouch for you?
In these times, you not only have to be good but also be perceived to be that by your stakeholders. If you claim to be transparent, committed, reliable and honest, most people you work with - employees, vendors, investors, bankers, consultants - should vouch for it.
Do they have the evidence to back you up? Third-party reference has become critical in these times, and no due diligence is complete without speaking to a cross-section of employees, investors, board members and vendors.
As a noted social marketing strategist, Ted Rubins says, "A brand is what a business does, and reputation is what people remember about it."
Time tested principles of building trust, being empathetic, listening without judgement to both what is said and what is left unsaid, ensuring two-way feedback, having difficult/open conversations, being vulnerable, avoiding unconscious bias and having a sense of humour is still very relevant irrespective of the channel of communication used.
As we approach the end of this year, things seem to be returning to a state of normalcy from panic, investments in the new early-stage business are likely to pick up pace as soon as we build the bridge of trust from unfamiliar territory too familiar one.
As we get used to the virtual mode of dealing with each other, communication holds the key as always for building confidence and do switch that video on during the video calls.
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Quick ways to build trust for investing/fundraising in the virtual age - CNBCTV18