Corporate venturers’ commitment, enthusiasm and sophistication make it unlikely large corporations that have embraced innovation will retreat from venture investing entirely in a time of crisis, Ping An Global Voyager Fund’s Donald Lacey told Global Corporate Venturing.
The $1bn Global Voyager Fund invests on behalf of China-based insurance group Ping An and has deployed approximately $250m over the past three years, mostly in the financial and healthcare technology sectors, in addition to new economy businesses with a strong tie-in to financial services.
While large businesses will probably maintain their commitment, smaller ‘hobby’ efforts in corporate venture capital could retrench in a meaningful way during a potential downturn, according to Lacey, Global Voyager Fund’s managing director and chief operating officer.
“This is an asset class with profoundly cyclical characteristics,” he said. “The near-term outlook is obviously badly diminished, and it is hard to see how we avoid a wave of startup failures. Global VC deal volumes are already way off. Businesses that were low on capital early in the year with high burn rates and planned raises for [the first three quarters] are at immediate risk.
“It has struck me that companies with younger founders do not seem to be ‘battening down the hatches’ quite as quickly or aggressively as businesses whose leaders lived through past crises, which I find worrying.
Lacey added: “We think of ourselves not as an early-stage VC but more as ‘growth-stage’ investors, in the sense that we write relatively larger cheques to more established companies that are at a commercial inflection point,” the fund having led a $146m round for investment assessment technology developer iCapital Network earlier this week.
Ping An is headquartered in the Chinese city of Shenzhen, only a short flight away from Wuhan, the initial epicentre of the novel coronavirus outbreak. The corporate therefore had to make considerable adjustments to its work practices weeks before the rest of the world followed suit.
Lacey explained: “Ping An insures roughly one out of every seven people in China and employs about one out of every 800 people in the country.
“As Covid-19 was first being recognised as a major threat, Ping An’s technology team engaged in a massive effort to deploy a host of remote work solutions for 440,000 of our employees in a 72-hour sprint, which was an incredible success.
“We have since made our homegrown remote work platforms available to other businesses in China.”
While China’s efforts to manage the spread of Covid-19 within its borders have yielded results, leading to economic activity beginning to resume at a healthy clip, Lacey said Hong Kong did not experience the total lockdown some other jurisdictions did.
“No one [in Hong Kong] is celebrating victory and we are very focused on avoiding a resurgence of cases, but we are still in the office,” he said, adding: “We are not having face-to-face meetings with prospective targets or portfolio companies.”
The global dislocation caused by Covid-19 is negatively impacting the availability of capital for companies old and new, as well as the way deals get priced. However, Global Voyager Fund’s historical strategy of focusing on larger businesses with revenues and established client bases suits the current climate.
The fund is also continuing to invest in long-term priorities such as artificial intelligence-equipped healthcare technology, the development of which is expected to only accelerate from now, Lacey said, though he believes much of the recent stress experienced by traditional financial institutions has been exacerbated by clunky and out-of-date infrastructure.
Regarding the vehicle’s relationship with its parent company, Lacey said: “Ping An is a tremendous partner and parent for our fund. I have always been impressed with the degree of time our company’s seniormost executives make for us, and the enthusiasm they have for our mission.
“In the current crisis, what has been great is the way many Ping An business units have made themselves available to provide real-world insight and advice, based on our early experience of Covid-19, to our portfolio companies.”
As an example, Lacey mentioned the collaboration between China-based online car marketplace called Autohome, of which Ping An is the majority owner, and India-headquartered peer CarDekho, one of Global Voyager Fund’s portfolio companies.
Lacey said: “Car sales in China dropped by 80% to 90% earlier this year as a result of the virus. Autohome had to think hard about how best to react to what was a dramatic, if temporary, change in environment.
“CarDekho is a great business, but they are now wondering how best to react to a potential slowdown in India. Autohome’s management team reached out to CarDekho and set up a series of conference calls with CarDekho’s team to share lessons learned on the basis of our ahead-of-the-curve experience with our business in China. We have done plenty of similar things with our other portfolio companies.”
Lacey pledged support for the fund’s portfolio companies, even at points of hardship, concluding: “At Ping An, we market ourselves as a positive and proactive partner to our portfolio companies, and I am glad that even in a time of great global stress we are following through on that commitment.”
Photo courtesy of Donald Lacey.
