GAS portfolio survey shows long-term optimism

By Chris Joly

​Green Angel Syndicate is the only angel investment syndicate in the UK specialising in investments that are of benefit to the Green Economy.  As such, its priority focus has always been resource use sectors, where innovations are needed to make the ways we use food, water, energy, waste and recycling more sustainable for the challenge we face.  ​

​Photo by Ross Stephenson on Unsplash

This focus is now more important than ever.  In the face of the worst global health crisis in living memory, access to safe, secure, and healthy water, food and energy is more important than ever.

​The portfolio of companies invested in by GAS members naturally includes a large proportion of companies that are working in these vital resource sectors.  ​Although these sectors are among the very few sectors in the economy that are still thriving, because we cannot live without these resources, we recognised that many of the Portfolio companies would be adversely affected by the crisis.  Hence we undertook a review to assess the impact of the Covid-19 pandemic on our portfolio companies.  We have now completed that review and are pleased to present it to you now.  Its objectives are to determine:

1. The companies’ views on the impact on their businesses in the short, medium and long terms. (We consider medium term to be when the lock-down in the UK ends).
2. What the new risks are to the businesses.
3. What steps they have taken to mitigate the potentially negative impact of the pandemic.

Whilst we are unable to publish sensitive company details in this open forum we have summarised the responses received in the belief that by sharing the common reactions and anticipated mitigations of our portfolio companies, they and others will gain confidence that their present situations are not unique and that a brighter future is not so far away.
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Unsurprisingly, many of the responses were predictable but there were a few surprises.

​Impact on the Companies

• The views vary considerably with most being negative (some strongly so), some being neutral (or waiting to see), and some being quite positive.
• Some companies are expecting a significant bounce at the end of the lock-down period.
• Reassuringly, most companies do not expect a negative impact on their business in the longer term.
• Interestingly, quite a few companies see a positive longer-term impact because they expect customer behaviour to change permanently and quite radically once the crisis ends, and the change in behaviour will follow a trend towards a Greener lifestyle that lies at the heart of the aims of Green Angel Syndicate and all of its Portfolio companies.

​This last point echoes comments reported in the financial press recently that the current adversity is forcing us all to rethink our values and the purpose of business and finance. This serves to reinforce the need for change that has long been part of the message of Green Angel Syndicate and has been embedded in the criteria for investment.  Hence this is reflected in our Portfolio companies.

​New Risks to the Businesses

• Most companies are concerned about their ability to continue operating normally during lock-down.
• Most companies are concerned about likely delays to their revenue which would lead to cashflow problems.
• A number of companies that are not well funded at the moment are nervous about raising capital in the coming months.
• Most companies that sell products and are reliant on a supply chain are potentially vulnerable to supply disruption.
• Very few companies are expecting to lose customers in the medium to long term.

​Again, this last point is encouraging. It shows a conformity of opinion that strong customer relationships will survive the crisis. In the rigorous due diligence that we believe is a hallmark of our methodology and success, the importance of our portfolio companies' direct relationships between management and key customers features high on our list of priorities.

Mitigation Steps Being Taken

• All companies have moved quickly to follow government guidelines to protect their staff, contractors and customers.
• All companies are implementing measures to conserve cash.
• All companies continue to engage closely with their customers. 
• The companies that are reliant on a supply chain have been working closely with their suppliers to implement measures to mitigate disruption.
• Some of the companies have been quick to spot opportunities to pivot their business models in response to changing demand and are positioning to capture potential upside.

In conclusion

When contacting our founders and CEOs we were initially concerned that the natural Panglossian traits of the entrepreneur might result in unrealistically optimistic reports. This has clearly not been the case. The honesty of the negative assessments for the short-term prospects and the immediacy and severity of the actions being taken to safeguard the businesses is actually reassuring to see. Too positive a spin on what is clearly a dark and difficult time to be nursing a young start-up company would have been cause for even greater concern.  We are confident that all that can be done to mitigate against the pandemic is being done and we continue to offer our support to portfolio companies.

We are sharing with the portfolio companies our findings about the steps being taken by their fellow management teams to ensure that exhaustive measures and best practices are being adopted.

Ultimately, we believe that their success, and the success of Green Angel Syndicate, in trading through this awful crisis will be helpful in addressing the global challenge to maintain safe, secure and healthy resources across the entire population.

Chris Joly is a Director of Green Angel Syndicate, the only angel investment syndicate in the UK specialising in the fight against Climate Change and Global Warming. For regular updates follow Green Angel Syndicate on LinkedIn and Twitter.