Such is the current approach to the government offering unprecedented amounts of cash to companies to help fend off some of the economic impact of the coronavirus. Some corporate venturing units are turning it down but less because they thought it illusionary than because of reputational implications if their portfolio companies received it, according to insights shared by BP Ventures and law firm DLA Piper on yesterday’s GCV webinar.
David Hayes, chief investment officer at BP Ventures, said even though its own budgets are more constrained given the oil price shock it was trying to step in and offer extra funding to portfolio companies.
As Mark Radcliffe, senior partner, and Matthew (Mac) Bernstein, partner, at DLA Piper confirmed, this was being repeated by other venture investors. A shift from “am I eligible” for government handouts prevalent among investors even a few weeks ago to effectively more about “am I really affected or what are the issues if I take the money”.
Some venture investors, however, are still pushing governments for more. The Financial Times covered expected policy announcements due in the UK on Monday, while accountants Deloitte has handy charts here on the main international fiscal stimuli.
It is a delicate balance to be on the wrong side of and claiming money that could have gone to others perceived as more in need would be a terrible place to be as this column argued last week (to the usual self-serving vitriol: “This is, sadly, THE most ill-informed editorial that I have read through this current crisis”, etc). UK startup investor Robin Klein has – thanks Robin! – since argued strongly that startups should not be bailed out.
The context for investors who argue for portfolio companies to receive backing is the public looks at their own wealth and the massive amounts of dry powder running to more than $1 trillion in the broader private equity and venture capital industry and the $22 trillion of cash sitting in corporate balance sheets and then compare it to the inequality many are facing in their own lives and conclude the system is rigged against them.
The Food Foundation, a research organisation, said on Saturday that 6% of surveyed adults, the equivalent of 3m people, told them that a lack of food had forced someone in their household to go without eating during the past three weeks and half of them had gone a whole day without eating since the lockdown came into effect.
It is the right thing to give the $100 to someone else in this scenario and tremendous leadership by BP and others to step up to portfolio companies in its place.
