Fundraising in a Post-COVID World Webinar

First Republic Bank
May 7, 2020
Fundraising in a Post-COVID World Webinar

Listen to this past webinar to hear advice on navigating the fundraising process from our expert panelists. Some of the topics they’ll discuss: how COVID has affected startups, what startups and investors do that is and isn’t working and how COVID will change the landscape.

Transcript of audio:

Kelly Caviglia: Good morning and good afternoon. My name is Kelly Caviglia and I'm the Director of Tech Banking at First Republic Bank. Thank you all for joining us today for a special presentation on Fundraising in a post-COVID world. We've invited an expert panel of speakers, including Ullas Naik, Founder and General Partner of Streamlined Ventures; Mark White, Partner of White, Summers, Caffee & James LLP; and Ryan Keating, managing partner of Keating Consulting Group.

Before we begin the discussion, I'd like to first express First Republic's appreciation for the tech community. During these difficult times, we've been inspired by your resilience and determination in the face of great change and challenge. We want you to know that we are here to help the tech sector in good times and in times of struggle and that we believe we will emerge from this period stronger for the efforts we are making today.

Now, for the practical piece. Before we start, (inaudible) we will take question at the end of the session. To submit a question, please utilize the button on the left side of the screen, Ask a Question. And now, let me turn it over to our moderator for today, Ryan Keating, CEO and Managing Partner of Keating Consulting Group. Ryan?

Ryan Keating: Great. Thank you, Kelly. So today, you can already see this is indicative of the world we all live in but I'm the one on video. Our other guest speakers are going to have to do it without video but bear with us. We have a lot of interesting content to cover and just in all honestly, we've actually been adjusting the questions as we have been receiving some great input from guests that have joined the webinar.

These are questions that we set up that we wanted to discuss, that we wanted to share, primarily focused on what is a startup to do today? How has fundraising maybe changed? How should you be thinking about the right way for current investors, reaching out and talking to VCs?

And so as Kelly introduced on our panel, we have a real live VC and Ullas also has a fund focused on (inaudible) stage investing. And Mark White from White, Summers who has for 20, 30 years been supporting startups in Silicon Valley.

So I'm going to run through some questions, give them both a chance to address. I'll comment as well. One of the things that we do at Keating Consulting Group at least for startups, we have about 100 clients that we are working with and it's pretty interesting times. A lot of these questions have been formed around what we're hearing from our clients and paired with the input that we receive from you as you signed up for this webinar.

So we'll jump right in. We've got a lot to cover and we'll try to get as many questions as we can. So Ullas, starting with you, I think the biggest question that I hear from clients and that what everybody is wondering is what does this mean for fundraising? And specifically for Streamlined Ventures, has this changed your approach not only to maybe new investments but also your existing portfolio?

Ullas Naik: Thank you. Welcome everybody. I'll give people just a little bit of background on me so they can put my comments in context. I've been a venture investor for about approaching 25 years. I built three venture firms. Streamlined Ventures is my most recent firm that I started building about nine years ago and we have about 130 companies that we've invested in, currently about 80 to 85 of them are active and I have investment experience across over 400 companies during the last 25 years.

And so with that as context, I also wanted to mention that I've gone through now two significant downturns over the last 25 years, 2000 and 2001 being the bubble first, the internet bubble that had burst, and then 2008-2009 when the financial bubble burst. And have had experience in sort of helping guide our portfolio companies through that downturn during those difficult times.

And I think these times are just as difficult and perhaps even more so because it was unexpected. There were no warning signs and then the slowdown that has occurred since was so drastic and so broad that we, while drawing upon our experiences from the past, we had to sort of come up with new playbooks in order to sort of help our portfolio companies make it through this.

So to your question about what are we seeing in the funding environment… Well, in terms of new investments, and I'll speak to our firm and I'll speak to what we're seeing more broadly. In the March-April timeframe, we decided that we might slow down our investment pace a little bit because we needed all the available bandwidth to focus on our existing portfolio companies, to do all the triage and work that needed to be done to help get them through this.

That said, we have kept an open mind to investing and our general piece of investing is about one new company per month. And I'm proud to say that even in this time, even though we have this posture of slowing down, we've kind of sort of stayed at the pace of about one new company per month. And I suspect we will continue to keep an open mind and there will be interesting opportunities that will come along.

What I have noticed in the broader community, though, is that a lot of venture folks took on a similar posture to us, which is let's go focus on our portfolio initially. And then I've seen the vast majority of them are still in that mode of let's wait and see how things play out. There's a huge fog that’s been created, especially for companies with enterprise sales cycles, huge fog that’s been created around how those sales cycles will play out.

And I suspect that until we have a better sense for how that fog is going to clear, I don’t think that that capital that’s sitting on the sidelines is going to come back into the market in a more meaningful way. I suspect that that’s probably going to take place in the Q3 timeframe. So for entrepreneurs in our portfolio that are looking to raise capital, we have created mechanisms by which, or thought processes, or plans by which we are definitely telling them not to waste time raising money, at least through June. And to prepare for a slightly better environment where probably our companies will be more successful in raising capital in the second half of this year and certainly, in the first half of 2021.

Ryan Keating: Great. And we're seeing similar things where the first reaction, I like the term you used, triage, was immediately kind of seen our venture-backed clients -- it's an assessment. Where are you at, how are you set for this. Put a lot of focus on an internal portfolio as opposed to looking at new investments. But it sounds like you're keeping up your pace, maybe one new investment per month. I know there's been a First Republic Bank survey that suggested that there would be -- the majority of VCs were looking to slow down the intake of new investments at least for the rest of this year with a focus on their internal portfolio.

And Mark, maybe same question for you. I know you see a lot in terms of the actual financings and when deals are coming through. Do you expect much of a slowdown in new investments and what are you seeing for follow-on deals? I know it's only been six weeks and these things are probably been in process for a while. But again, you've been through the same two downturns that Ullas has been prior to that.

Mark White: I think I'll start in the way that Ullas did, just 30 seconds on our firm. We're a global firm and a corporate boutique at the same time. So we've been in business for over 22 years, ex-big firm people. We do deals with the venture community, private equity, and we represent primarily tech companies and branded product companies.

We've got two offices in Europe. We've got multiple offices in the U.S. And so my perspective is through the lens of what's going on in the U.S. and Europe primarily. We've got a substantial practice in India and China. We've extended into Africa. So I'll just kind of give my perspective really from a U.S. perspective for this webinar.

We are seeing the deals that we were working on prior to March continue. And I would say most of those have now closed. There's a new urgency in getting transactions done and issues on terms that we would normally bicker about and maybe negotiate a bit harder are going away. Everyone wants to get transactions done quickly. Cash is really important.

In terms of the pipeline, it has come down and I think I share that with my brethren in other firms here in the Valley. So the level of activity, and Ullas has spoken to this, has been sort of delayed until Q3/Q4. The advice we're going to our companies, and we see other lawyers giving to their companies as well is prepare for what you're going to do second half of the year. I think Ullas is spot on. Nobody is knocking on doors of new investors right now asking for money. If you've got existing investors, of course, you're coordinating with them. You're setting budgets. I think Ullas said something very telling, which sales cycles are unknown. Business models are being questioned. Sort of customer adoption expectations are at issue right now.

And so you've got to really think through what you believe is going to be environment the second half the year. And nobody really knows but you've got to take the time now to sort of plan for that. And I think Ullas is absolutely correct. When the floodgates open, everyone is going to come out at the same time. It's not going to be a petering, I think, of companies trying to find capital and new relationships.

Just one other observation. We are seeing an uptick in strategic partnering work that our firm is doing right now. It's the new resource quite honestly in the absence of cash. You've got to sort of extend your business platform by working with other partners. And the environment is much more welcoming for that kind of initiative than it's been in the past.

Ryan Keating: Along those lines and sticking with you, Mark, what are you seeing now or maybe expecting to see as this stretches out a little bit in terms of what people like to refer to as investor friendly terms in term sheets versus founder friendly terms, specifically pre-money valuation, liquidation preferences, et cetera? What are your thoughts on what you're seeing now and what you expect coming?

Mark White: Well, let me just start and say that nobody really knows. So it's all speculation and I've done a lot of reading in preparation for this webinar, and I've particularly found useful the (inaudible) West survey that they do every quarter and now monthly, given what's happening with COVID-19. And from what I've read, the consensus is that terms really are not changing a heck of a lot. Valuations obviously will.

So what you typically find with distressed company financing, where there's maybe a multiple placed on preference returns to investors. There's ratchet sort of antidilution mechanisms have been put into place in the past. And Ullas went back to 2000, the burst of the bubble back then and those kinds of terms were common then. They are not now.

So the terms themselves haven't changed and I think both investors and companies want to get deals done. Valuations will be -- they are down now according to the surveys I've read from a number of sources for Q1. The question is what is going to be the stabilization on where valuations lie. And kind of going into Q3, Q4, in terms of expectation of what terms will be, I think the consensus in the community, legal community is that terms probably are not going to change a lot. There's sort of a reputational positioning of funds relative to each other. There's been this trend line to be founder friendly to get into the best companies and that’s been a good development for everybody.

And there's been renewed communication and cooperation between investors and companies, particularly in the last two months. Not that it wasn’t there before but everyone is getting closer. And so I wouldn’t think terms would be divergent from that quite honestly. I think there would be creative thinking about valuations both on the down side and how to kind of climb back up. But really the advice that we're giving our companies and that I hear other people giving their companies as well is don’t quibble on valuations. Don’t let that stand in the way of getting cash in the door.

Make sure that you're aligned with your investors in terms of the division of the company. I think giving projections on what the company ought to be doing is going to be scaled back dramatically and I think any company that goes out there and says that we're going to conquer the world and kind of sticks with what their model was before COVID-19 is going to be questioned heavily. So I think really it's the business model. It's the metrics. They're all going to change. I think you've got to be very realistic on revenue generation.

I think you'll have a lot of forgiving investors as well. Everybody wants companies to have a realistic view of what their sector is going to look. So bottom line, terms the same, valuations going to change. I think there's going to be a renewed focus on sort of what is the development path for company and probably much more reserved capital than in the past.

Ullas Naik: If you don’t mind, I have an added couple points that I might add to what Mark just said, which is all spot-on. We have another lens with which we look at all of this, which is sectors that have tailwinds coming off of COVID and then sectors that have headwinds. So when I initially referenced those enterprise-oriented companies, those are companies that most likely will have headwinds. But there's categories and I see it across their portfolio where massive tailwinds are occurring as a result of what's happening with COVID.

For instance, we were early investors, seed investors in Doordash. The volumes at Doordash, like deliver companies like Doordash have just absolutely exploded. So if you look at sectors like delivery, like on-demand delivery, gaming, healthcare, digital health, ecommerce infrastructure, collaboration, and productivity, especially on distributed teams. Those categories are absolutely exploding.

So amazingly, completely counter intuitively, in this environment, our portfolio companies that are in those categories are actually entertaining inbound interest for up rounds. And two of them are already in the process of doing that. We have another company called 2BTV which was just acquired. The acquisition actually closed only last week and that was acquired for $500 million in this environment and we had seeded that company only five years ago.

So you can see that it just depends on whether you're in a tailwind sector or a headwind sector and that also has implication on terms, and valuations, and so forth. So I just wanted to add that extra point.

Ryan Keating: That’s good clarification. We see the same with our portfolio companies. Their revenue models, for example, you even mentioned Doordash. We have companies that have food delivery, subscription-based. Those revenue models have really seen as increase or the business has an increased demand. We have other revenue models that have really been hit hard by this. So it is truly on an individualized basis on how we've advised our companies to react to this to go forward with funding.

I think in summary, and this fits with what I've kind of read and seen as well, that there is pressure on pre-money valuations. Ullas, I know your fund focuses on seed stage investments. From the reading I've done, that seems to be the area that could expect the most pressure, which might make sense. Largely pre-revenue. A lot still to prove so a lot still risk on the table. Are you seeing that kind of pressure isolated maybe on the seed stage? Or again, if companies are showing up and have a business model that thrives in this market, that’s one thing. But how are you seeing in general the pre-money valuations that the seed stage is (inaudible)?

Ullas Naik: I think completely valid point. So we are definitely seeing seed stage valuations compressed. I think we were at a point, super inflation on (inaudible) stage asset prices as of Q4 of last year. In fact, when we had our LP annual meeting, I put up a slide that I told our LPs that listen, assets are inflated. We're expecting some recessionary headwinds. Of course, we had no idea about COVID at the time but we were expecting recessionary headwinds.

And I told the LPs that we're probably going to get better pricing sometime in the 2020 timeframe. And it's actually played out exactly like that except worse where often, I will tell people that 30% down is the new up round. And so we are -- part of the reason why we're still investing at our own pace of one a month is one of the factors is this asset deflation, asset-pricing deflation in the seed stage, right. Because we're getting extremely high quality deals and overlay that with tailwind sectors. If you can actually get really high quality valuation with great founders in great markets that have then we will always be buying in that kind of a scenario.

So you're right in saying that we are seeing the seed pricing for -- seed valuations for companies that are in market today and especially for companies where runway might be shorter than expected, where you can easily see that, listen, if you can't make it back the next three months, then the entrepreneurs are a lot more amenable to a different type of valuation. And not that we want to be predatory. It's just reflective of the new reality. I suspect that by the early part of next year, we'll start to see asset pricing at the seed stage inflate again.

Ryan Keating: Great. Thank you. Sticking with you if you don’t mind. A lot of the questions that we're getting and even ones that came in before this call are around how should the approach change when reaching out to a VC at this point. It's obviously a lot of Zoom-based pitch meetings. There's questions about is it really likely to close a round, completely, without meeting in person. And how prepared should a company be to really address their living in a post-COVID world? Or are you kind of longer-term view looking beyond that? I know as Mark mentioned, who knows what's going to come out of this. But what are you recommending to VCs in terms of how to show up maybe differently to pitch to you today.

Ullas Naik: Well, multiple things on that. One is in the presentation itself, even if it's the first presentation on a Zoom call or any video format, to have a very realistic and grounded description of how COVID has impacted your industry and the prospects for the business. If you don’t start with that, you lose credibility. So you have to start with bringing that up somewhere in the presentation.

You also have to -- being an entrepreneur, you have to be an optimist. So you also have to paint a picture of why the world is going to emerge from this. And once it emerges, what the end state might look like and where that company plays in the context of that end stage. So I think both of those have to be brought to the table in terms of the initial presentation.

I have been telling our portfolio companies that want to raise additional capital that this is a great time to be building relationships. A lot of VCs are on Zoom calls all the time. Well, this is a great time to do Zoom calls with them. Build that relationship, and get to know them, explain the value proposition, build that credibility with the VC so that as and when the floodgates do open. And maybe as I said, Q3, Q4, or Q1 of next year, somewhere in that timeframe, that you've already built credibility and relationships there that hold you in good stead for when you have to actually go raise capital there.

Now, to your point about video as a format, I think video as a format works really well for that initial relationship building. But it doesn’t work as well in the context of pitching to a broad partnership. I have a common example, amazingly, in this environment. One of our portfolio companies did actually get a term sheet even though they started raising money in March. So everything was done over Zoom and they got a term sheet from a well-known VC. But the only reason that happened is that they are in a super tailwind category where the numbers are just off the charts. And it so happened that this entrepreneur knew that set of partnership from a prior experience.

And so there's already the relationship where it's a known entity and they’ve met the person so it made it easier for them to make a decision in this environment. But if it's a brand new relationship, it's very hard to get a broad partnership, and it's a partnership of six people, onboard over a Zoom call when you can't really do the touchy-feely stuff around getting to know the essence of the individual.

So I think it is going to slow down the pace of new investment activity because of this inability to engage in person. One thing I think may mitigate that is the ability to do a lot more reference checking. So that even if I've not met the person -- if I cannot meet the entrepreneur in person, of course, multiple interactions over Zoom will give me a sense as to their thought process. How refined is the thought process around that business model. So I will certainly get a sense for that and then I might do maybe double the number of reference call on that individual than I might have done in the past. Because I'm just trying to now triangulate all the other pieces that I want that I perceive risk in through different sources of people who might know that individual. So I think you'll see more reference checking in this environment if at all companies are to sort of raise capital, purely on a virtual basis.

Ryan Keating: I know for our portfolio companies, they have been largely successful in kind of continuing the process with speaking with investors. But it seems to have stretched out the process a little bit. I'm curious, Mark, I know you had mentioned that deals that had been in process going into this, closed, and that you've seen the pipeline slow down. Are you seeing that as these deals are stretching out? They're taking longer or there's just a lot fewer of them that are coming through?

Mark White: We've got a mix of financings and exit events, acquisitions. And the ones that have been stretched out really are the acquisitions. And I think the reason is because the buyers are a bit concerned on the value that they committed to before and they're questioning that. And so they're not looking for a long-term relationship as much as they are for a good asset purchase.

On the funding side, actually, the deals that we're doing, and that have closed, and that we're still working towards a close on, those are moving nicely quite honestly. The pipeline is more of what Ullas said, which is folks are waiting to commit new money into new companies that they don’t have any existing relationship into Q3 or Q4. So that’s what we're seeing.

Just commenting a bit on what Ullas had to say, I totally agree with them that the pitches that we're helping our companies with have to lead with COVID-19. And it's got be, like, the very first slide. And the narrative is really important here, which is what did you do in March and April. These are for ongoing company. So if you're a raw startup, that’s a different sort of presentation. But for companies that have a track record of a year or two under their belt, they're kind of scaling towards a Series A. They’ve done a Series C already. And they've done sort of market penetration at a certain level but they’ve committed resources. Did they scale back? How did they do it? How did they treat their people? What talent do you have in-house? What do you need going forward? That’s all really important.

To Ullas' point about runway cash. What this means for companies as they kind of plan for the future and position themselves, profitability and an early breakeven is more important than ever. Obviously, there are more capital-intensive businesses. The gestation period for establishing traction is longer in certain sectors than not. And you've got to balance sort of profitability with the attraction of the sector overall. And sort of the tailwind sort of issues that Ullas has been talking to.

But it's more important than ever to show that it's not going to take two years to kind of establish some type of leadership in the sector. So you've got to keep that in mind, which it how can you accelerate really the maturity of the business, accelerate the entire business cycle. And so in answer to your question for the companies that aren't getting funded now, just because they weren’t in the pipeline, my comment really is the ones in the pipeline are getting funded actually. But the ones that are sort of positioning, you've got to rethink everything right now. And kind of taking the bullet points that Ullas said.

The one thing I'd like to point out is that we're advising our companies that they may want to think about how do you do a bridge financing through the end of this year, just to kind of get through the end of the year, to see what the environment is like, and then do a bigger round in 2021. So the mindset we're giving our companies is why don't you paint for the investors what you've got to do now and what's going to go on in 2021 if things go according to plan and how you're going to adjust.

You've got to show flexibility. You've got to show how you're going to run the business under different scenarios. You've got to commit yourself, as Ullas said. You've got to tell them what the future is and what you're seeing. You can be questioned on your assumptions. That’s okay. But to show sector leadership, you've got to say, this is what we think it's going to be like. This is what we've all learned, we being every company competitor in the sector as of now. And this is what we see as being the requirements for success going forward. And this is our solution. And so you're putting a position out there but you've got to be flexible on the business model because you don’t really know how that’s going to unfold.

Ryan Keating: That kind of leads to a question that we've seen quite a few come in related to bridging, and specifically convertible notes. And for you as well, obviously (inaudible). I think the immediate reaction and advice that it sounds like we're all kind of offering is if you have existing investors and an existing investor base, try to focus there. Raising money right now, new equity, is likely going to be more expensive than it would have been three, four, six months ago from a dilution standpoint. If you have existing investors that’s a good place to start.

Along those lines, with regard to convertible notes or space, use them interchangeably for this, are you seeing any difference in the terms associated with them or even kind of how they're being relied on more so now than maybe, say, going after equity? Maybe equity being put on hold for a more traditional bridge convertible note type solution?

Mark White: So I'll just react to that and Ullas can jump in. So in the European practice, we're seeing price round. So the mindset out there is more of establishing sort of a stake in the company early on and with tranche to financing space on milestones, that’s been the model at least early stage for quite a while. Obviously, the funding community out there, there's a lot of unicorn companies now, quite a few. The financing sizes are much larger and so Europe is really caught up largely to sort of the trend lines in the U.S.

But still early stage, we're seeing price rounds. That’s not true, as you said, on early stage companies here in the U.S. So the structure of a safe financing or a note hasn’t really changed. The question is the cap conversion number and we would encourage our companies to be very flexible on that for two reasons. One is that cash is important and so don’t let that stand in the way. The second is typically it's a smaller amount of capital and so it's not going to have a dramatic impact on dilution in the cap table at the end of the day. And so don’t worry about it. Kind of get the cash you need to go through the next seven, eight months. Get into Q1, Q2 of 2021 and then pricing becomes an issue. So you're absolutely right. You want to kick the can down the road and don’t let the cap conversion on a note financing stand in the way.

Ullas Naik: I'll build on that and I'll sort of give anecdotal examples from our portfolio companies. So we have about 80 active companies. Over the last six, weight weeks, we've done one-on-one sessions with almost all of them around planning for how we get through certainly this COVID phase and this is defensive planning, right. So we're trying to get as many of our companies to 12 months of cash runway. And I'm talking about gross burn cash runway. So if we can get as many of them through that period, it gives a lot more optionality when hopefully, things start to get better.

So that's at a very high level. And then we're using a variety of tools to do that. And some of it could be around, unfortunately, where appropriate, for headwind sectors, headcount reduction or salary reductions. We're utilizing -- you talked about convertible notes. I'll get to that because that’s why I brought all this up. But convertible notes is certainly one tool but also applying through to some of the government stimulus money from the Cares Act, PPP loans and so forth. So a lot of our earlier stage companies have actually applied for that and some of them have actually gotten the capital. So that has helped them get that meaningful enough runway so that they have a chance to sort of survive to thrive.

And so the reason I brought all of that up in the context of your question around notes and safes is that unless a company has gone through that process and has taken the pain of demonstrating that they have sufficient runway, and sufficient runway might be, okay, look, I've got seven, eight months of runway now after all these actions, or nine months of runway. We really need to get it to 12 months of runway. And in those scenarios, we're like, all right, this is the situation where all the housekeeping has been done. The triage has been completed. The company has a real fighting chance now. Let's give it a little bit extra runway so that we're not sort of surviving on fumes and still keeping the business going and keeping it viable. So that as and when things start to sort of uptick, we can actually step on the gas.

So we look at it from the standpoint of both defensive planning to make sure you have 12 months of runway and then also now, I'm moving into the phase, after eight weeks of defensive planning, move into the phase with a subset of the companies, around offensive planning. Which is, okay, what does this mean if and when the markets start to open? What are we going to do, right? How do we take share? And what is the capital requirements and so forth and then doing that planning exercise as well.

So slowly, steadily, we've migrated from defensive into offensive now. And again, in offensive, if the opportunity set is really compelling, putting in additional capital into those companies using a convertible note or a safe becomes an interesting, appealing, in fact an attractive value proposition for us as existing investors for a handful of companies.

Ryan Keating: Thank you. We're having these conversations every day with our companies. So I'd say the one bit of advice and kind of really builds off of what both of you have been talking about is communicate with your board. Streamlined Ventures has reached out, had one-on-ones with every portfolio company it sounds like. We recommend the same constantly to our clients. You've got to talk to your board, especially now more than you might normally. These decisions should be made as a whole. We'll even have clients that are wanting to go down this path and we'll say let's stop, let's get the board involved, make sure we're all in agreement. So very good.

I know we want to move to wrap up here quickly. There was a couple things that came through that I wanted to ask question wise real quick and then we can kind of wrap this up. The first one I thought has been coming through quite a bit are metrics. And Ullas, this is probably primarily for you. If companies are impacted by this and all of a sudden, the projected revenue is questionable at that, even the timing of revenue, what other maybe metrics or criteria are VC, Streamlined and others, that you could speak to, what are you focusing on? Has anything changed in what you're looking at in terms of metrics? And I imagine this is largely in a forecast, pro forma way.

Ullas Naik: I think all metrics are viewed with skepticism in the current environment. We've gone through a massive system shock and at least for three, four months after a shock like this, I think anything that anybody says is just going to be taken with a grain of salt. At the end of the day, after all of this, I think you have to be able to demonstrate possible unit economics over a period of time. And granted, where we play is in the much earlier stages of a company's evolution. So we're steep stage investor and we're involved in the A and the B and then after that, we generally don’t get that involved, right. We're handing off.

So in those stages, I think showing a real meaningful path to possible unit economics, even if you don’t have it immediately, in a post-COVID environment. And then also demonstrating how the value proposition and product strategy, product architecture and so forth has the ability to take market share over time relative to incumbents who might be huddled in this environment. I think those kinds of things become extremely important and to be able to speak to that with credibility and refinement I think sort of helps companies stand apart.

I mean I'll give you an example. We have a company in the 00 it's an AI company. We do a lot of applied AI companies and in the AI space, aimed at airlines, building revenue management systems. I mean imagine of all the sectors to have headwind, right. Airlines are just getting decimated and interestingly enough, even though we're getting all these headwinds, the founder here is so tenacious that he has pivoted the value proposition to explain to the airlines that we have this neural network-based revenue management system. We're going to build the Sabre of the future and as you come out of this, this should become the default way by which you do all revenue management, allows you to get significantly higher revenue yield at much, much lower cost.

And what's interesting is that that has resulted in at least eight more airlines in the last two months alone, this is the most beleaguered industry, one of the most beleaguered industry out there right now, come to him and say, you know what, let's start pilots. It's extraordinary. And so I think that level of creative thinking that is very important. We have this other company called Sensia, which is in the HR space. It's an AI company around helping recruiters recruit much, much more efficiently. Well, nobody is recruiting right now so what they did is they pivoted their value proposition into something called Ready to Hire, which essentially says that listen, I want to build the operating system of humans so that all the companies that are laying off people do it through Ready to Hire. We'll find them opportunities at other companies that are actually recruiting in other sectors, which they would never even have thought of going to.

So you see what I'm saying? I'm talking about that it's unit economics. It's the planning process. There's refinement around sort of how you take market share. But also the malleability and the tenacity to be able to pivot a value proposition, that goes to the heart of who that entrepreneur is. I think if you are able to start packaging that and show that to entrepreneurs -- I mean to investors that will make for a significantly more compelling story.

Ryan Keating: You're actually right, Ullas. And just one thing that’s important is when entrepreneurs come to you with what they want to do, and they're going into a distressed sector with a new product offering, or whatever it may be, I'm sure you're looking at the assumptions behind their modeling. And so it's okay. You can question everything but I think what you want to see is how people are thinking about this. And if you change the assumptions, you have different numbers, and you can kind of play that out under different scenarios.

But the assumptions are key and the fact is you want to see how entrepreneurs are thinking about their industry. They could be wrong. Who knows? And then you want to see the range of possibilities and that kind of helps you quantify risk. So the numbers are really important in that respect.

Ullas Naik: And I think categories are important. Our most recent investment was in digital health. Actually, we made two investments in digital health. One is a direct to consumer play around mental health, which you can imagine is very apropos in this environment. And the second company is Telemedicine Company specializing in pediatrics. So no company like that, no brand like that exists. The company is called Blueberry Medical. It just doesn’t exist. And so there's an opportunity to build something very significant, utilizing the current trends.

So I think I'm mentioning these names partly so that we get a sense for how entrepreneurs ought to sort of verbalize that positioning so that even if you're in a headwind sector, tell us how the headwind is going to turn into a tailwind.

Ryan Keating: Thank you. And this is -- we've got many more questions that are coming in and I appreciate all of the input but I do need to turn it over. We're coming up on the end here. Thank you both. I want to bring back in Kelly who wanted to wrap it up and I think we are going to follow-up on the other questions that didn’t get answered. So they won't go ignored. We'll respond to you in some fashion. So Kelly, if you're there.

Kelly Caviglia: Thank you, Ryan. Hi, everyone again. My name is Kelly Caviglia. I'm director of Tech Banking at First Republic Bank. I'd like to thank all of you for attending our online event and thank you especially to our speakers for their insights into the fundraising environment in the post-COVID world. Unfortunately, as Ryan mentioned, we did not have time answer everyone's questions but we will follow-up with an email and it will also include links to related information and resources.

As I mentioned in the beginning of the event, we are proud to serve the tech community in innovation hubs across the U.S. We hope you'll join us for future events. In the meantime, please reach out to any of us for your banking needs. Have a great day everyone.

Ryan Keating: Thank you.

Mark White: Thank you.

Ullas Naik: Thank you.


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