Before he was an investor, Patrick Lor was a serial founder and technology executive at companies like iStockphoto, Fotolia, and Dissolve.
Now managing partner of Panache Ventures, Lor is able to translate those past experiences into tailored support and insights for his firm’s 67 portfolio company CEOs. And as the larger startup community is coming to grips with the financial effects of the COVID-19 pandemic, Lor has some critical advice, not just for the companies he’s invested in but also for the startup community at large.
In this short interview, he speaks to what companies should do during this period of uncertainty, lessons from past economic downturns, what he believes founders are struggling with most, and what the solution is.
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What should entrepreneurs keep in mind during these uncertain times?
Most people are afflicted with recency bias, so when things are good, they think that things will be good forever. When things are bad, they think that it’s going to be bad forever. It’s obvious that neither is true, but the thing to keep in mind is that the economy is not always logical. Now, more than ever, entrepreneurs need to lean into their skills as communicators and leaders to hear and understand what’s going on in people’s minds. Great entrepreneurs are great because they’ve gained some customer, investor, and market insights that nobody else has.
What can a founder do to increase his/her company’s odds of survival?
Over-communicate, and seek more conversations with more people than you normally would. This means talking to customers and making sure they know what your plans are. Same thing with investors, suppliers, and employees. Two of our investors, National Bank of Canada and BMO, told us that they really appreciate it when the companies they work with share plans with them, as they’re eager to help. You won’t know who can help and how until you create the dialogue.
Are there any parallels between this and other recent crises?
In all economic downturns, liquidity is a major issue. What’s different about this one is that there wasn’t a massive bubble, nor was there any kind of underlying fraud. However, there was too much money in the system, and valuations rose to record highs, and a lot of companies raised massive amounts of money to fund unprofitable growth. The good news is that most of the VC community was already seeking profitability over growth. As with all the recessions in the past 20 years, investor cash will take a step back and customer cash will rule over the next few years — so founders that provide exceptional value to their customers will emerge as winners.
What’s the biggest thing founders are struggling with?
Mental health. The mental stress of being a founder has always been intense, and very few people understand what it’s like, because there can only be so many CEOs or founders. This crisis has amplified the stress; that’s the downside. The upside is that we’re all experiencing the same crisis, so it feels like a great opportunity for CEOs to lean on each other for help.
How is this crisis affecting your investing plans in the short and long-term?
Short term, Panache is focusing on helping our founders get through the next six months, ensuring that they’re doing everything possible to extend runways and keep their companies on target. Once the smoke clears, we’ll have a better idea of what adjustments we’ll have to make to our investment thesis. We’re in a good position right now, as the majority of our fund is still yet to be deployed. As for the long-term implications, the economy will eventually return to a growth cycle and we will once again have the opportunity to invest in founders and companies that will change the world.
This interview has been condensed and edited for clarity.