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Coronavirus Crisis has Uneven Impact on Start-ups and Venture Capital

June 1, 2020

Sands Capital Managing Director Scott Frederick discussed innovation and developments on the frontlines of technology at the Enterprise 50 (E50) Summit in May.

The crisis created by the spread of the coronavirus has significantly affected start-ups and venture capital, but the impact has not been evenly felt. Some companies are thriving, while others have experienced severe reductions in revenues. As companies regroup, venture capitalists around the globe have logged an extraordinary number of hours on emergency board calls, as they try to help their companies react appropriately. Frederick advised that companies undertake ongoing scenario analysis, which will force them to acknowledge what is changing and prevent any kind of cognitive dissonance.

While there is an abundance of uncertainty, Frederick reminded that innovation will never go out of style and there have been remarkable stories of resilience.  He discussed how the work-from-home trend could change the where people live and how businesses recruit talent. 

In closing Frederick noted that every time markets have become more digital, winner take-all economics have become more prevalent. Digital goods have enormous economies of scale, giving the market leader an inherent cost advantage as capacity constraints become increasingly irrelevant. He reminded that winner take-all economics are not limited to digital goods or technology. The rise of ecommerce and the power of global search now reduce the cost of information discovery for any market. As a result, second-rate producers can no longer rely on consumer ignorance or geographic barriers to protect margins.

E50 is a private, invitation-only forum for chief information officers of globally respected organizations. The forum is designed to provide an opportunity for members to candidly share ideas, perspectives and experiences on issues of common interest with the goal of enhancing the clarity, focus and effectiveness of their activities and roles.

Disclosures:

The views expressed are the opinion of Sands Capital Management and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed were current as of the date indicated and are subject to change. This material may contain forward-looking statements, which are subject to uncertainty and contingencies outside of Sands Capital’s control. Readers should not place undue reliance upon these forward-looking statements. There is no guarantee that Sands Capital will meet its stated goals. Past performance is not indicative of future results.

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