Investment And Innovation In Isolation: How Investors Weathered This Year

Dr. Silvia Mah, partner at Ad Astra Ventures, helps women founders grow innovative startups tackling big ideas.

Just as entrepreneurs found new ways to pivot throughout 2020, investors faced new pressures while managing their portfolios and deciding the next best steps. An unpredictable economy required us to step up and fund innovation so we could move ahead into next year with new vaccines, the next generation of the digital workplace and the prominent social justice issues of our time.

As an angel investor and venture capitalist who helps female founders to build and scale their startups, I was particularly focused on the underrepresented voices in the startup world — especially diverse female founders — who don’t receive enough funding from traditional avenues. This year, partnerships and collaborations were a key component in increasing the intersectional funding of women and diverse founders, and they will lead to better progress in closing the gender and racial funding gap in 2021.

As we look ahead, it’s important to reflect on where we stand now and how we can solve our investment questions in this new environment. Here are the trends I saw this year:

1. Investors doubled-down on their existing portfolio.

At the beginning of the pandemic, innovative investors became deeply involved with their founders and asked important questions around solutions to shore up losses, potential pivots for growth, and ideas for sustainability. I also saw many investors halt their plans to fund new projects, and instead, focus on their current portfolio. They saved higher percentages of their reserved investable capital than usual for follow-on rounds and reconfigured their typical thought processes and portfolio plans.

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For instance, the Tech Coast Angels’ Angel Capital Entrepreneur Fund quickly created due diligence reports for increased investor participation. Then TCA San Diego created and implemented a five-point plan: continue investing activity, support portfolio companies, donate to vendors, advocate for the CARES Act nationally and spread a message of HOPE — Hold On, Pain Ends.

2. Investors focused on multiple ‘pandemics’ at once.

Without a doubt, the Covid-19 pandemic prompted investors to look at medical-related innovation in their portfolios, but they also paid attention to innovation in the work-from-home economy, mental health arena and social/racial justice movements as well. I saw some investors hinge their entire investment thesis on Covid-related developments, whereas others felt a pressing urge to be change makers and investors in social innovation.

With early-stage companies in particular, angel investors took on more risk and connected with new founders that they hadn’t considered before. At Next Wave Impact, a group of about 200 female investors including myself, we prioritized questions about creating intersectionality and investing with a diversity-focused lens. We pivoted our Founders of Color Showcase to a virtual opportunity, which allowed 45 participants to invest in five companies. Rather than raising a new fund, Next Wave created individual “special purpose vehicles” to seed small funds for each of the companies, lowering the minimum requirement for investors to join. A process that can take years happened in mere months. Now investors are looking ahead to 2021, when the Founders of Color Showcase will become an annual event. 

3. Investors made quick decisions in a new environment.

It’s tough to work in a vacuum, but in many instances this year, investors did just that. Typically, they do their due diligence, follow market valuations and evaluate trends. With overwhelming changes across all industries, however, there were limited numbers and no trends to follow.

The most innovative investors turned back to the basics and continuously communicated with their founders to determine the next steps. They followed their gut instincts and made the most educated decisions possible to weather the various upheavals throughout the year. At Ad Astra Ventures, we quickly took a new approach of opening up more opportunities for female founders to connect with investors who understand product-market fit and have a values-based approach to sourcing deals. I expect investors and funds — and their founders — will be the ones who define our best practices in coming years.

4. Investors focused on community and networks.

The age-old adage that “your network is your net worth” rang especially true this year. Smart investors spent countless hours on the phone, talking to their community about microtrends and day-by-day changes in their industries. I saw investors break down silos to bring new faces into the market. They cut the minimum entry investments to open up their networks and created a new sense of community for the future.

At the San Diego Angel Conference in late March, for instance, the barrier was lowered to $5,000 to enter a $200,000 fund. The conference also shifted to virtual, which allowed new investors with tight schedules to get involved. Current members and fund managers also focused on education and digital training to help new investors feel welcome and included. Within a matter of weeks, the fund grew to a global reach because people could join from wherever they were to support the most important focus — to fund the companies who persisted and had resilient founders. The outcome: three companies were funded, all women-led.

5. Investors shifted their funding perspectives.

Even as many investors doubled-down on their current portfolios, they made room for new investments, too, and they tackled their approach in a new way. The pivots during the pandemic allowed investors to act quickly and fund the change they wanted to see in the world.

As the pandemic hit, Queen City Angels in Ohio reached out to portfolio CEOs to understand their needs and support them as they created new plans. The group designed a dashboard of the portfolio companies to track the “pulse” of each company’s current health (through business status, cash on hand/runway, ability to continue sales and access to relief) as well as projected impact of the pandemic on their business outlook.

In 2021, I expect we’ll see investors continue to follow these new practices, and we’ll likely see even more nuanced approaches based on what they learned this year. Ultimately, I believe this innovation will break down the barriers for investment — both for the founders and for new people who want to fund impactful startups. With an eye toward intersectionality, strong communication and transparency, I hope and imagine we’ll come out of isolation even better than before, tackling the world’s most challenging problems with strong innovation leaders and the investors ready to invest.


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