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2mos ago Venture Capital Green Cow Venture Capital Fund Views: 1k

The National Bureau of Economic Research (NBER), an American private nonprofit research organization, defines a recession as “a significant decline in economic activity spread across the economy, lasting more than two quarters which is 6 months, normally visible in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales”.

During the 2001 recession, my partner Maggie Sprenger was a college student at UC Santa Barbara. She sat on an advisory committee for the UC System’s newest campus, UC Merced, and made her first real estate investment in the area as she watched campus plans expand.

Later, during the 2008 crisis, she leveraged her operational and entrepreneurial mindset to reposition multi-tenant housing, introducing environmentally friendly ways to reduce utilities and a community-centric approach to tenant management.

In the same time period, I was starting my first job in venture. It was a challenging moment to become the first hire at a fledgling $100M corporate venture capital fund. Yet, I’d argue that it was perfect timing. The lessons learned in that span were priceless — particularly around sourcing, evaluating, and supporting startups in an economic downturn. The reality that most startups didn’t make it was countered by an incredible opportunity to develop and hone the craft of identifying common traits in those that would. The fund would go on to make 16 investments with 8 exits.

Fast forward to the summer of 2018 — eight years into the longest period of economic expansion in US history — when Maggie and I made the decision to start Green Cow Venture Capital with “recession-resiliency” as the cornerstone of our investment thesis. While it made perfect sense to us, using the “R” word was puzzling, if not a little taboo, to most. We encountered naysayers even as recently as a couple of months ago.

That our thesis was shaped by this contrarian thinking wasn’t surprising — our joint work experiences led us to think realistically about markets and strategize for a capital constrained future:

First, the economy is cyclical in nature, and 10 years is the record for economic expansion…so the likelihood a startup would face a downturn during growth or exit was high.

Second, the venture cycle is long — 7–10 years long. While we got “lucky” at my previous fund (five exits in 4.5 years), the fact remains that most exits take time. Focusing on companies that are better at weathering ups and downs than others is fundamental.

Third, ideas are a dime a dozen — it is about execution. Those founders who build and hustle even when capital constrained to get things done are those who are going to survive a recession — and therefore more likely to thrive in any situation.

Finally, entrepreneurship has always been about decision making (controllable) and timing (not controllable). The first decision a founder needs to make is what problem she or he is trying to solve. Those solutions to problems that persist or are amplified due to a recession are those which will have the greatest stickiness factor (regardless of time). Get that first decision right, and you are off to the races.

Now, the devastating impact of Covid-19 on the world economy has triggered a new recession. Our recession-resilient portfolio of startups solving fundamental problems around scarcity and inefficiency — put simply the “need-to-haves” not the “nice-to-haves” — is a meaningful differentiator.

Below is a cursory look at each of the nine startups GCVC invested in since the fund’s inception. You’ll notice another common thread emerge amongst a portfolio of recession-resilient companies — they blend real profits with real purpose.

Ampathy: There couldn’t be a more important time for them to launch than now — when the audience, content creators, and advertisers have philanthropy top of mind. Ampathy’s social-impact-as-a-service platform enables engaged users to redirect corporate social responsibility dollars (CSR) and corporate digital marketing budgets to specific social issues that they care about.

Bear Flag Robotics: Self-driving tractors save money and boost harvest yield. Farmers are desperate for ways to reduce costs. That’s where BFR’s self-driving technology for tractors and implements comes in — the technology can return up to 75% of existing driving labor costs and with greater efficiency from optimized path planning and control, farmers can save up to an additional 20%. Operating autonomously day and night means increased output and a safer workplace.

Besser.fm: This is a podcast and content platform seeing strong growth. The popularity of podcasts are on the rise globally as we all adjust to new norms. Smart, funny, entertaining, and educational content created in the US but localized for easier consumption in the home is in high demand.

BlendidBlendid is a robotics company and their first product is an autonomous smoothie kiosk. As restrictions on work and living are relaxed, Blendid is extremely well positioned to fill the void of healthy, low-cost alternatives to fast food. With 99% up-time, employers and campuses can create safe spaces to feed their communities.

CloudAdminCloudAdmin reduces cloud spend by more than 50%. Cloud infrastructure spend is often the second largest expense to organizations of all sizes (behind payroll). More companies are forced to rely even more heavily on their cloud providers to support the shifting platforms of business and commerce. CloudAdmin’s lightweight, frictionless cloud optimization software can save those on AWS or Azure up to 60% on their monthly cloud bill. They are giving away their service for free for 60 days. Sign up here: www.cloudadmin.io/partner/gcvc.

Cushion.aiThink of Cushion.ai as your personal CFO. They’ve been helping people manage cash flow by creating a bot that fights bank and credit card fees on behalf of their customers. They released a new version of their app this week — check out cushion.ai to fight fees and now keep 100% of the refunds.

Freedom RoboticsThis is the Salesforce.com for robotics. If you are like us and believe that robots and automation are two catalysts of the next wave of innovation, then helping enterprises to build, deploy, and manage fleets of robots at scale with greater efficiency via critical software infrastructure is a linchpin for those ecosystems.

String: Customers were already pining for businesses to utilize text messaging to communicate with them — often employees of businesses in highly regulated industries, such as banking, continue to skirt the law to do so in an effort to maintain better relationships with their customers. Now, there is an even greater need for communication tools (e.g. Zoom and Slack). String which has rebuilt the phone client for modern professionals in a messaging first world — one that is compliant, cost effective and easy-to-use. They are even enabling companies like Meals On Wheels and Equal.ly to reach volunteers, donors, and parents more effectively during the pandemic. They are offering nonprofits and local businesses early access to their platform here: https://earlyaccess.joinstring.com/localsupport/.

Valid8Audits, bankruptcy, company restructuring, all become more prevalent during recessions. Valid8’s platform automates third-party bank verification to dramatically reduce time, cost, and effort, while greatly enhancing the accuracy of financial audits.

The short-term prognosis feels bleak and the long-term ramifications on our labor force and overall health is really anyone’s guess. That said, it’s an incredible opportunity for investors and innovation in the private markets.

It is not just about lower valuations or a less competitive talent acquisition environment. Industries typically resistant to disruption are shifting gears and becoming more open to technology adoption that can address key problems around scarcity and inefficiencies. This environment, with all its tremendous difficulties and hardship will be the proving ground for the next round of battle-tested billion-dollar technology startups to be built.

If you’d like to learn more about what we are building at Green Cow Venture Capital, don’t hesitate to reach out via greencow.vc/connect.

Stay safe and healthy out there.

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