Business As Unusual: A Venture Lender’s View
It has been an incredibly busy two months for us at Genesis Alternative Ventures, the current market volatility notwithstanding.
In April and May, we took advantage of the reopening of global borders to visit our investors, partners, and portfolio companies in Tokyo, Seoul, and Indonesia. In May, we hosted our General Partners Advisory Board and Limited Partners to share the progress of the Fund and to discuss the macro-economic investment outlook. It was refreshing to catch up with everyone face-to-face and to reaffirm the trust that we built via two years of virtual meetings.
All the discussions I had were enlightening, insightful and relevant in the current market uncertainties and I thank everyone for sharing your thoughts and time so generously. As one good deed deserves another, I thought it would be useful to sum up and share my takeaways that might help guide us through these turbulent times:
- Growth of venture debt : Amid rising interest rates and increased market volatility, private debt tends to shine and venture debt providers across Southeast Asia, India and the US are reporting a surge in deals and a growing pipeline.
- Cash is King: With tighter funding market environment and falling valuations, startups should look for opportunities to consolidate and acquire good assets to strengthen their position while cutting back on cash burn to focus on profitability and preserve cash runway
- Keep Calm and Carry On: Venture investors have indicated continued support for existing companies and will allocate more capital to their portfolio, instead of hunting for new ones. However, with freshly minted Southeast Asia venture equity funds like Jungle Ventures Fund IV ($600m), East Ventures multistage $550m venture and growth fund, Mass Mutual Ventures Fund II ($300m), there is still ample liquidity for early-stage companies seeking entry ticket funding. However, founders are advised to sharpen their pencils as the days of funding back-of-envelope ideas are gone.
- There ARE Alternatives to TINA (There Is No Alternative): Navigating a challenging environment, sophisticated investors are pivoting from traditional portfolios that were based on a mix of public equities and fixed income. Increasingly they are looking for an alternative bucket of private equity, venture debt, and real estate where opportunities for better yields than liquid assets, with lower volatility and less correlation to headline risk.
Next month, we hope to share some insights on Founders’ sentiments from a survey of the entrepreneur community. I thank you in advance to all those who have kindly agreed to be surveyed and share your thoughts with us.
Disclaimer: The content in this article is meant to be informative and for general purposes only. It is not and shall not be construed as investment advice.
(A version of this article first appeared on LinkedIn on 3 June 2022.)