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How do venture capitalists in Taiwan deal with the impact of the pandemic?

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As the coronavirus spreads across borders, investors are taking precautionary measures to keep themselves safe, such as limiting travel, moving meetings online, and working from home.

Ondine Capital’s founding partner Randolph Hsu, based in Shanghai, has been staying in his homeland Taiwan recently. He told Business Next via video conference that he has cancelled all business trips to Mainland China and Southeast Asia, where most of its portfolio companies are located, including Snapask, Carsome, and HiAR.

Mr. Hsu was visiting the Indonesian capital Jakarta for a local startup event expected to draw more than 450 attendees, but the plan fell through after it was scrapped due to concerns around the fast-spreading virus. However, he said overall, event cancellations have little impact on his deal flow as many roadshows go virtual.

On the other hand, with trade shows and conferences cancelled, Infinity Ventures (IVP) told Business Next that its plans to connect with startup teams and other VC investors have been disrupted.

While its own event -- an annual summit for CEOs, scheduled in June -- is likely to be held online, the VC firm has also seen startups in its portfolio holding virtual events. “How to cultivate the community remotely is a big challenge,” said IVP partner Joseph Huang.

Communication is the key

As many companies, VCs are making the switch to remote work, and fortunately, the process has been almost painless. Mr. Huang told Business Next that his firm had given employees full flexibility to work from home long before most companies started to ask theirs to do so.

Joseph Huang, Partner at Infinity Ventures
Business Next

Early-stage VC firm Cherubic Ventures, with offices in Beijing, San Francisco, and Taipei, said the transition to the new style of work is smooth because they have always been collaborating remotely.

The firm’s managing partner Tina Cheng said it’s true that meetings with portfolio companies aren’t held as frequently as before, but it doesn’t mean they communicate less. “Instead, we enhance communication with these companies in other means because of the current situation,” she explained.

Tina Cheng, Managing Partner at Cherubic Ventures
Business Next

As companies “reconsider their plan for the year,” she said her team has been helping them prepare for the impact of the situation, ranging from reducing payroll bills to developing a plan in case an employee is put in quarantine or contracts the virus. “In general, they might need to be more thrifty,” she added.

Mr. Huang said his team has also had “more communication with their portfolio companies” recently to learn how they adapt and ensure they survive the economic downturn by reducing cash burn.

The reduction of face-to-face meetings, though doesn’t seem to affect much how VCs work with their portfolio, does make it a little more challenging than usual to make investment decisions. Mr. Huang said, for instance, it’s difficult to perform due diligence remotely, when one needs to go through a company’s financial statements.

Mr. Hsu from Ondine Capital recognizes the necessity of in-person meetings, noting that it’s “not just about meeting the startup founders but understanding how they work with others in the workplace.”

Randolph Hsu, Founding Partner at Ondine Capital
Business Next

Meanwhile, in times of economic uncertainty, VC firms are also ramping up communication with their limited partners (LPs), from whom they raise capital for various funds. “Most LPs want to slow down and be careful,” IVP partner Mr. Huang said. “We also apply more scrutiny to the companies we invest.”

As a managing partner, Ms. Cheng said her team can give a second thought to companies in hard hit industries or markets, though they have been receiving phone calls as usual from startups pitching for investment. Recently, they have been working more closely with their LPs, too.

Mr. Hsu, instead, said he wouldn’t avoid funding companies working in the most affected B2C industries. “You still jump at it if there’s a good deal,” he said.

Opportunities are emerging

Besides B2B businesses based in China, Ondine Capital’s portfolio comprises B2C businesses based in Southeast Asia; many of them have been temporarily shut down, as the impact of fear over the disease has been widely perceived.

However, a consumer-facing startup like Carsome, whose business involves staff visiting customers to check the car they want to sell on its trading platform, is still doing quite well because “it has enough cash in reserve and has just closed a funding round,” Mr. Hsu explained.

Cherubic Ventures’s Ms. Cheng said her portfolio companies working on healthcare, online learning (like Hahow), e-commerce (like Pinkoi), and even meditation (like Calm) have noticed a business boom recently.

“Because of Covid-19, people start to pay more attention to their health, and this benefits healthcare startups,” she pointed out. “It would also be easier for them to fundraise.”

IVP’s Mr. Huang, optimistic about startups taking advantage of the situation, also told Business Next that Buyandship, a portfolio company that provides global shipping services, has seen a 50% user growth so far since the outbreak started.

The VC firm invests mostly in Series A startups offering Internet-based services, so the impact of the virus has been either positive or subtle.

He believes the current situation will boost the growth of Internet industry and open up new opportunities for investments like ghost kitchen, food-preparation facilities that support virtual food brands. He also sees great growth potential in Kiwibot, his firm’s portfolio company that offers robot delivery service.

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