The Covid-19 pandemic has already sent shockwaves throughout every aspect of society. Industry analysts say the reverberations of those shockwaves will also reshape the investment landscape over the next decade.
One of the primary ways COVID-19 is a game-changer is the effect it will have on company valuations. It’s reasonable to expect that company valuations will shrink by 30% to 50% when compared to the same time a year ago, said a McKinsey report.
Public markets are already sustaining a severe hit due to the effects of the pandemic. This will certainly propagate through all private investment markets. The past few years of robust public market and economic growth have made for “company friendly” conditions. Going forward, however, the situation will turn “investor friendly.”
In short, investors will command more power over what they invest in. They will increasingly participate in strategy and decision making. This in turn may train a whole new generation of entrepreneurs to cede more power and/or sway to VC investors because they will be more dependent on the funds they need to succeed.
Another major attribute of the post-COVID investment world will be favoring start-ups that are lean and mean as compared to “long shot” operations that have characterized the past decade. The latter can burn through cash fast without offering a crystal clear idea of where things are going. In short, investors will be far less willing to take risks on “bold ideas” in favor of putting their money into sober, well-thought-out business models with tight planning.
There will certainly be a greater emphasis in the future on a firm’s ability to “weather a storm” and have a contingency plan for worst-case scenario situations. Again, it’s all about reducing risk and staying closer to a sure thing as possible. Less risk means fewer opportunities for innovation, exciting breakthrough products and services. However, the post-COVID investment world will have far less stomach for that manner of speculation.
Finally, the past decade that has offered leeway to business models that sought to disrupt and creatively redefined brand relationships may now be seen as too risky. Rather, the post-COVID decade will favor models that rethink the basics of human contact within a transaction. High priority values will be sustainability, efficient operation, and an ability to adapt.