How 6 top VCs are adapting to the new uncertainty

As the global economy grinds to a halt, every business sector has been impacted, including the linked worlds of startups and venture capital.

But how much has really changed? If you read VC Twitter, you might think that nothing has changed at all. It’s not hard to find investors who say they are still cutting checks and doing deals. But as Q1 venture data trickles in, it appears that a slowdown in VC activity is gradually forming, something that founders have anecdotally shared with TechCrunch.

To get a better handle on how venture capitalists are approaching today’s market, TechCrunch corresponded with a number of active investors to learn how their investment selection process might be changing in light of COVID-19 and its related disruptions. We wanted to know how their investing cadence in Q1 2020 compared to the final quarter of 2019 and the prior-year period. We also asked if their focus had changed, how valuations have shifted and what their take on the LP market is today.

We heard back from Duncan Turner of SOSV, Alex Doll of TenEleven Ventures, Alex Niehenke of Scale Venture Partners, Paul Murphy of Northzone, Sean Park of Anthemis and John Vrionis of Unusual Ventures.

We’ll start with the key themes from their answers and then share each set of responses in detail.

Three key themes for raising in 2020

The VCs who responded haven’t slowed their investing pace — yet.

There’s likely some selection bias at work, but the venture capitalists who were willing to answer our questions were quick to note that they wrote a similar number of checks in Q1 2020 as in both Q4 2019 (the sequentially preceding quarter) and Q1 2019 (the year-ago quarter). Some were even willing to share numbers.

Leading VCs discuss how COVID-19 has impacted the world of digital health

In December 2019, Extra Crunch spoke to a group of investors leading the charge in health tech to discuss where they saw the most opportunity in the space leading into 2020.

At the time, respondents highlighted startups in digital therapeutics, telehealth and mental health that were improving medical practitioner efficiency or streamlining the distribution of care, amongst a variety of other digital health markets that were garnering the most attention.

In the months since, the COVID-19 crisis has debilitated national healthcare systems and the global economy. Weaknesses in healthcare systems have become clearer than ever, while startups and capital providers have struggled to operate while wide swaths of the market effectively shut down.

Given significant volatility and the rapid changes seen in the worlds of healthcare, venture and startups broadly, we wanted to understand which inefficiencies might have been brought to light, what new opportunities might exist for founders looking to reduce friction in healthcare systems, how digital health startups have been impacted and how health tech investing as a whole has changed.

We asked several of the VCs who participated in our last digital health survey to update us on how COVID-19 is impacting digital health startups and broader healthcare systems around the world:

Annie Case, Kleiner Perkins

Our current unprecedented global crisis has put a spotlight on digital health. In the last few weeks alone, we have seen what feels like a decade’s worth of societal and regulatory changes that require digital health companies to step up and embrace new challenges and opportunities.

Leading VCs discuss how COVID-19 is impacting real estate & proptech

Several months ago, we surveyed more than 20 leading real estate VCs to learn about what was exciting them most in the real estate tech sector and hear their opinions on proptech trends like co-working, flexible office space and remote office space.

Since we published our survey, COVID-19 has flipped the real estate sector on its head as more companies move toward mandatory remote work, retail businesses are forced to temporarily shut their doors and high-traffic properties thin out. Suddenly, the traditionally predictable world of real estate is more chaotic and unclear than ever.

What are the short and long-term impacts of pandemic-induced volatility? Does this open up opportunities for proptech startups or shutter them? What does this mean from an investing point of view? We asked several of the VCs that participated in our last survey to update us on how COVID-19 is impacting real estate startups, non-proptech companies in general and the broader real estate market overall:

Christopher Yip, RET Ventures

Despite its banner year in 2019, proptech will not be immune to the pressures venture-backed companies face in a market pullback, and we are preparing ourselves and our portfolio companies for a bumpy year.

Where top VCs are investing in remote events

The novel coronavirus pandemic has rapidly moved companies into a remote-first world.

Nearly all of the world’s largest events have been canceled, put on pause or pivoted to online-only. In the tech world, event cancellations thus far have included SXSW, GDC, Mobile World Congress, Google I/O, Facebook F8, E3 and others.

As more and more hosts consider staging fully remote events as possible alternatives, we decided to take a deeper look into the venture-backed startups focused on supporting large-scale virtual gatherings, like Hopin and Run The World. To further understand the impact of COVID-19, we asked five leading VCs who have invested in or have knowledge of startups focused on remote events to update us on the state of the market and to share where they see opportunity in the sector:

Sarah Cannon, Index Ventures

Which trends in remote events/conferencing excite you the most from an investing perspective?

Where top VCs are investing in manufacturing and warehouse robotics

Robotics and automation tools are now foundational parts of warehouses and manufacturing facilities around the world. Unlike many other robotics and AI use cases, the technology has moved well beyond the theoretical into practice and is used by small suppliers and large companies like Amazon and Walmart.

There’s no doubt that automation will transform every step of the supply chain, from manufacturing to fulfillment to shipping and logistics. The only question is how long such a revolution will take.

There’s still plenty of market left to transform and lots of room for new players to redefine different verticals, even with many of the existing leaders having already staked their claim. Naturally, VCs are plenty eager to invest millions in the technology. In 2019 alone, manufacturing, machinery and automation saw roughly 800-900 venture-backed fundraising rounds, according to data from Pitchbook and Crunchbase, close to two-thirds of which were still early-stage (pre-seed to Series B) investments.

With our 2020 Robotics+AI sessions event less than two weeks away, we’ve decided to perform temperature checks across some of the hottest robotics sub-verticals to see which trends are coming down the pipe and where checks are actually being written. Just as we did with construction robotics last week, this time, we asked six leading VCs who actively invest in manufacturing automation robotics to share what’s exciting them most and where they see opportunities in the sector:

Rohit Sharma, True Ventures

Which trends are you most excited about in manufacturing/warehouse automation robotics from an investing perspective?

Where top VCs are investing in construction robotics

Venture capital has been flooding the various subverticals under the robotics umbrella in recent years, and the construction space is one of the largest beneficiaries.

Last November, we surveyed 13 of the top robotics-focused VCs to find out which areas of robotics are exciting them most going into 2020. One of the most common areas of attention respondents highlighted were startups focused on construction and manufacturing. In 2019 alone, the robotics space saw roughly 600 venture-backed fundraising rounds, while construction companies successfully raised roughly 200 venture rounds.

With our 2020 Robotics + AI sessions event on the horizon in early March, we’re diving back into the sector to learn about the attributes of construction attracting robotics VCs the most and which types of startups VCs are actually writing checks for in 2020. We asked 16 leading people who actively invest in construction robotics and work at firms spanning early to growth-stage to share what’s exciting them most and where they see opportunity in the sector:

 

Rohit Sharma, True Ventures

True Ventures has been investing in industrial automation broadly for 4+ years and focusing on founders who bring technology to market that eliminates repetitive manual labor and multiplies human productivity by automating routine tasks.

Where top VCs are investing in open source and dev tools (Part 2 of 2)

In part two of a survey that asks top VCs about exciting opportunities in open source and dev tools, we dig into responses from 10 leading open-source-focused investors at firms that span early to growth stage across software-specific firms, corporate venture arms and prominent generalist firms.

In the conclusion to our survey, we’ll hear from:

These responses have been edited for clarity and length.

Where top VCs are investing in open source and dev tools (Part 1 of 2)

The once-polarizing world of open-source software has recently become one of the hotter destinations for VCs.

As the popularity of open source increases among organizations and developers, startups in the space have reached new heights and monstrous valuations.

Over the past several years, we’ve seen surging open-source companies like Databricks reach unicorn status, as well as VCs who cashed out behind a serious number of exits involving open-source and dev tool companies, deals like IBM’s Red Hat acquisition or Elastic’s late-2018 IPO. Last year, the exit spree continued with transactions like F5 Networks’ acquisition of NGINX and a number of high-profile acquisitions from mainstays like Microsoft and GitHub.

Similarly, venture investment in new startups in the space has continued to swell. More investors are taking shots at finding the next big payout, with annual invested capital in open-source and dev tool startups increasing at a roughly 10% compounded annual growth rate (CAGR) over the last five years, according to data from Crunchbase. Furthermore, attractive returns in the space seem to be adding more fuel to the fire, as open-source and dev tool startups saw more than $2 billion invested in the space in 2019 alone, per Crunchbase data.

As we close out another strong year for innovation and venture investing in the sector, we asked 18 of the top open-source-focused VCs who work at firms spanning early to growth stages to share what’s exciting them most and where they see opportunities. For purposes of length and clarity, responses have been edited and split (in no particular order) into part one and part two of this survey. In part one of our survey, we hear from:

Where top VCs are investing in travel, tourism and hospitality tech

The venture community has been fixated on travel and hospitality since the dot-com era and early-2000s, when mainstays like Kayak and Airbnb were still Silicon Valley darlings. As the multi-trillion-dollar global travel and hospitality market continues to grow, VCs are still foaming at the mouth for the opportunity to redefine the ways we move and stay around the world.

Despite the cyclical nature of the travel sector, deal flow in travel and hospitality has remained strong and largely stable over the last half-decade, according to data from Crunchbase and PitchBook. Over the same period, we’ve seen more than a handful of startups in the space reach unicorn status, including companies like Klook, Sonder, Flixbus, Vacasa, Wheels Up, TripActions and others.

High-profile funding rounds also appear to be popping up across travel and hospitality’s various sub-sectors, including bookings, activity marketplaces, short-term rental, tourism and hotel platforms. And companies are continuing to pull in funding rounds in the hundreds of millions to billion-dollar range, such as India hotel network company Oyo, which raised $1.5 billion in funding as recently as December.

While VC investment in the space has remained resilient, some investors are predicting it’s only a matter of time before the travel startup world hits a downturn. To get a temperature check on the state of the travel market, the outlook for fundraising and which sub-sectors might present the most attractive opportunities for startups today, we asked five leading VCs at firms spanning early to growth stages to share what’s exciting them most and where they see opportunity in travel, tourism and hospitality tech:

Gift Guide: Leading VCs recommend their favorite reads from 2019

Welcome to TechCrunch’s 2019 Holiday Gift Guide! Need help with gift ideas? We’re here to help! We’ll be rolling out gift guides from now through the end of December. You can find our other guides right here.

As we reach the end of 2019 and approach crunch time for everyone who has procrastinated holiday gift buying, we wanted to highlight a few more great reads that might add value to your life or are just plain-old fun.

Over the past couple of weeks, we’ve asked Extra Crunch members and the TechCrunch editorial staff for their favorite books of the year. Responses covered a huge mix of genres, narrative structures and formats, with titles that would fit the interests of anyone from your techno-nerd co-founder to your craziest second-cousin that you only see around the holidays.

For our last round of book recommendations, we decided to ask the investors who control the capital in Silicon Valley, help catalyze the industry’s biggest winners and ultimately influence what our future will look like. We surveyed a select group of five leading VCs on their top book recommendations for 2019 with the only criteria being that the respondents personally read the title this year and thought it was meaningful. Among our correspondents:

The books could cover any topic, be fiction or non-fiction and could be old, new or anything in between. Here are the six books that resonated with our panel of investors, all of which they would recommend to you, a friend or a family member looking for a great holiday gift. 

This article contains links to affiliate partners where available. When you buy through these links, TechCrunch may earn an affiliate commission.

Josh Wolfe, Lux Capital

Exhalation by Ted Chiang

Knopf / 368 pages / May 2019

This year for me it was Ted Chiang’s “Exhalation”. The gap between sci-fi and sci-fact keeps shrinking. I contend either our authors are becoming less creative or our scientists more creative. Chiang disproves the former. One of the most provocative stories in this collection is The Truth of Fact, The Truth of Feeling which parallels two protagonists set in the near future and the not-too-distant past. One sub-story centers on a Black Mirror-esque technology that gives high-fidelity perfect recall and recordings of prior experience. The other story is of a tribe that lives by oral tradition that has one member encounter an outsider with the technology of writing. Together they make a provocative poignant point on the distinction between being precise and being right—and the meaning in our lives between them.

Summary: “Exhalation” is the latest composition by acclaimed sci-fi writer Ted Chiang, whose short story titled “Story of Your Life” famously acted as the inspiration for the Oscar-nominated film “Arrival.” Chiang’s newest work is a collection of science fiction short stories and novelettes that stray away from the speculative dystopian side of the genre. Using common sci-fi motifs such as aliens and AI proliferation, the selected writings instead dial-in on the characters living in these imagined universes as they examine how societal and technological evolutions impact the ethical, philosophical and cognitive aspects of the human psyche and existence. 

Price: $16 on Amazon

Theresia Gouw, aCrew Capital

Alpha Girls: The Women Upstarts Who Took on Silicon Valley’s Male Culture and Made the Deals of a Lifetime by Julian Guthrie

Currency / 304 pages / April 2019

The most interesting book to come out in 2019 that tells the story of tech and venture is “Alpha Girls: The Women Upstarts Who Took on Silicon Valley’s Male Culture and Made the Deals of a Lifetime”, by Julian Guthrie. I find it a fascinating read (even if I weren’t included) – with stories that speak to both men and women, to the deals won and lost (Skype, Imperva, F5, Trulia, Facebook, Salesforce and more) and to the history of Silicon Valley through the lens of four outsiders. Despite having to pave their own path, the women jumped in headfirst in the pursuit of their dreams. You will walk away with a different view of how it is to be a woman in this male-dominated industry, and you will get a sense of the important role of male allies. “Alpha Girls” shows that women have long been “hidden figures” behind big companies and key deals. Finally, their stories are being told.

Summary: Silicon Valley’s massive gender gap is no secret, particularly in the notorious “boys and bros” club that is the venture capital industry. In “Alpha Girls: The Women Upstarts Who Took on Silicon Valley’s Male Culture and Made the Deals of a Lifetime,” esteemed business journalist, international best-selling author and multi-time Pulitzer nominee Julian Guthrie details the career paths of four leading female VCs (disclosure: our respondent Theresia Gouw is one of them) that have played major roles in shaping today’s tech and startup landscape.

Through first-hand accounts, Guthrie explores how Theresia, Magdalena Yesil (Broadway Angels, Salesforce, US Venture Partners), Mary Jane Elmore (Broadway Angels, Institutional Venture Partners (IVP) and Sonja Hoel Perkins (Broadway Angels, Menlo Ventures) first found their way to the male-dominated world of venture capital, the strategies they used to find recurring success and how they navigated the structural disadvantages of an industry built for others.

“Alpha Girls” offers tremendous, difficult-to-find depth around the professional, personal, and familial scenarios underrepresented groups in VC encounter as they look to challenge the status quo, find personal success and redefine an entire industry.

Price: $14 on Amazon

Mamoon Hamid, Kleiner Perkins

The Coddling of the American Mind by Greg Lukianoff and Jonathan Haidt

Penguin Press / 352 pages / September 2018

Our world is rapidly shifting around us – from evolving social norms, to the external stimuli that impact our well-being. It’s a new pace that is acutely felt in how we are raising and educating our kids and young adults. This book deeply explores the societal ramifications, and offers perspective about how we may be doing it all wrong.

Summary: “The Coddling of the American Mind” is a provocative sociological dive into how commonly accepted modern social and parenting practices have led to increased agitation and tension in today’s youth. Written by attorney, public advocate and First Amendment specialist Greg Lukianoff and social psychologist and NYU professor of ethical leadership Jonathan Haidt, “The Coddling of the American Mind” introduces its thesis by examining issues of censorship and free speech on college campuses, which are occurring at a more frequent clip than ever before.

As the authors debate the potential negative impacts that an overly partisan culture of “safety-ism” might have on mental health and development, they retrace the historical social trends and cultural transformations that led to today’s conditions. 

Price: $17 on Amazon

Maha Ibrahim, Canaan

The Back Channel by William Burns

Random House / 512 pages / March 2019

For the last two years, I’ve had the pleasure of serving as a Trustee for the Carnegie Endowment for International Peace where Bill Burns serves as President. Bill is the consummate statesman and has been a central figure in international diplomacy for decades. The depth of his knowledge is a testament to his commitment to international order and peace. “The Back Channel” provides readers with an inside look into his career in foreign service, from the Cold War and Middle East affairs to modern-day Russia. My respect for Bill was immense before I read the book and it only grew bigger with every chapter.

Summary: Throughout his illustrious, nearly thirty-year career in foreign service, William Burns has held titles that include the US ambassador to Russia and the Deputy Secretary of State. Burns’ memoirs, “The Back Channel,” focuses on the biggest policy decisions of Burns’ tenure.

Burns uses his own notes, declassified State Department documents and primary-source, first-hand analysis to offer up some inside baseball and help readers understand the strategic rationale and key considerations behind some of the most important U.S. foreign policy decisions that have shaped the global geopolitical landscape over the last two decades.

Price: $13 on Amazon

The Education of an Idealist by Samantha Power

Dey Street Books / 592 pages / September 2019

Ambassador Power is an icon of courage, compassion and resolve. During her recent book tour, I was fortunate enough to interview her and was struck by her humanity. The stories she writes about her impressive career are both powerful and personal. Ambassador Power immigrated to the US as a child and has since dedicated her life to human rights and equality. She is my age and has accomplished so much in her life, most recently as US Ambassador to the UN under President Obama. I don’t know anyone who, at 22, would voluntarily become a war correspondent (in Bosnia). I suspect she will one day run for political office and I will be a big supporter.

Summary: “Education of an Idealist” is the memoir of former US Ambassador to the United Nations and Pulitzer-award-winning author Samantha Power, detailing her journey from a child in Ireland, to an immigrant growing up in the US, through her Ivy League undergrad and legal education, all the way through her careers in journalism and public advocacy and her time working as a senior advisor to President Barack Obama. Even from a purely narrative perspective, Power’s lengthy journey, which brought her across the globe through war zones and revolutions long before her career in politics, is incredibly compelling on its own.

But Ambassador Power’s reflection offers even more value as she recounts how she overcame personal, professional and internal struggles as she traversed different geographies, environments and stages of her career and life.

Additionally, Power’s writing also offers up valuable lessons for those in the startup world. Power’s move from an external public advocate to a government policymaker, in a roundabout way (or at least in the eyes of startup nerds like us), provides a unique look into the transition, differences and challenges one may come across when moving from an externally focused role to an operational one.

Price: $18 on Amazon 

Jennifer Fonstad, Owl Capital

The First Congress: How James Madison, George Washington, and a Group of Extraordinary Men Invented the Government by Fergus M. Bordewich

Simon & Schuster / 416 pages / February 2017

As I read about impeachment proceedings, presidential elections, and racial tensions in today’s political climate, it begged the question – how did we get here?

While not knowing exactly what I was undertaking, I recently read the book, “The First Congress.” The book was a remarkable story about how both ordinary and extraordinary people took the ‘startup’ that was the United States in 1789 and launched us on a remarkable ride.

The book takes us through the critical decisions made by the country’s very first Congress, 1789-1791. This includes establishing the Supreme Court, passing the first 10 Amendments to the Constitution (later called the Bill of Rights), establishing the country’s first revenue ‘stream,’ and picking the location of the nation’s capital (putting our country’s hero – George Washington, in a different light).

It’s hard to fathom our nation as a startup. The country was fresh off of its failure as a Confederation of States, deeply in debt, with no source of revenue yet established. Two of the states had not yet ‘signed on’ to the whole enterprise. And while the Constitution put forth certain operating principles, it fell to this group of men (yes, all men and all white) to put many of the mechanisms in place that still guide and define us today. As one always trying to do what I do better and learn from the past, this was a terrific lesson in both getting this startup off the ground as well as the intended and unintended consequences of those decisions.

Summary: Writer and historian Fergus Bordewich’s “The First Congress” puts us in the room for the First Congress in our country’s history, which saw the admission of several states into the union, the passing of the Bill of Rights and several other of the biggest decisions that shaped the United States.

The book details how the founding fathers debated the United States’ structural and operational systems, including the American legal system and national banking system. Additionally, “The First Congress” highlights an interesting yet often overlooked period of US history, where the country was essentially functioning like a startup, grinding and building from scratch, having to create mission statements, organizational hierarchies, operational systems or otherwise for the very first time.

Price: $12 on Amazon