Vinted, Europe’s largest online C2C marketplace dedicated to second-hand fashion, announced today that it is donating over €1 million to support the fight against COVID-19.
For companies, crises are defining moments: They must prove that their business model is both sustainable and robust. And now, more than ever, they must deliver on every pledge and promise. A global watershed such as the COVID-19 pandemic is unprecedented; many companies have been catapulted into dire straits. Others have been able to leverage the situation as an opportunity for new, substantial growth and additional revenue streams. Christian Teichmann, Managing Director of Burda's international growth capital arm BurdaPrincipal Investments (BPI), looks back on the past few months and explains what companies need to focus on now, how investors can support young enterprises, and which BPI portfolio brands have weathered the storm particularly well.
For almost six months now, coronavirus has dominated every aspect of our personal and professional lives. What do young companies above all need to do in order to successfully meet these challenges?
The pandemic has uniquely spotlighted the importance of a strong team when forging a crisis-resistant company. After all, in addition to all the difficulties, a crisis also creates many opportunities that must be identified and harnessed as a team.
Companies with an excellent organizational structure have been able to make much better use of the opportunities than teams that were already burdened by problems before the crisis. Moreover, some companies were initially stunned by the upheaval, while others swiftly adapted their business models to distinguish themselves from their competitors more clearly. These companies did not hesitate to make ad-hoc decisions – or simply strike out in new directions with the goal of emerging as winners.
We have also seen that, especially in times like these, companies need a clear purpose. Those with scalable, all-digital platform models that invested early in digital have coped much better than those more traditional organizations that are still lagging behind in the digital stakes. A good capital structure is another invaluable survival tool. If a company has largely operated without a buffer before, it will soon find itself in trouble during a crisis.
Has your role as strategic partner and investor changed since COVID-19 struck? How are you helping Burda's investments to best manage the disruption?
As investors, we have always been there for our portfolio companies; we are now working with them even more closely than before. They have certainly benefited from the fact that, as a global player, we were able to liaise with and learn from other markets as to the best ways to soften the impact. Furthermore, we have continued to invest, which many others have not.
Which BPI portfolio companies have managed coronavirus particularly well?
In the first place, I’d like to point out that the e-learning platform Skillshare has grown enormously during this period; they understood like almost no other company how to leverage the situation as an opportunity. Skillshare was already strongly data-driven before COVID-19 and therefore able to react quickly – by offering various initiatives, e.g. free trials, to strengthen and expand their community. The Skillshare case demonstrates that businesses able to retain a strong community through fresh, ongoing inspiration are highly crisis-proof and scalable.
The online florist Bloom&Wild was able to post growth during the crisis as well. Like Skillshare, the company has invested in data-driven analysis for years, monitoring how to most effectively reach and retain customers. While Bloom&Wild has obviously also benefitted from the mandated retail closures during the lockdown, the company's dynamic response to the changes has been outstanding.
Last but not least, the Scandinavian fashion platform Miinto deserves a mention for the speed of its response. During the first week of the lockdown, it launched an advertising campaign under the motto "Shop with us" - calling on customers to support the Danish economy via the Miinto platform. Many Danish boutiques then offered their products via Miinto for the first time, securing the company numerous new partners during the pandemic.
What are your thoughts as to how coronavirus is changing the investment industry? Are investments being made much more cautiously?
Companies that demonstrated a good pre-pandemic performance thanks to strong teams and high scalability are still receiving fresh capital to fuel further growth. Nowadays you certainly take a closer look at the companies you are investing in and avoid risks if the business models and teams are not 100% sound. What is more, many of the leading banks, concerned about being unable to fully evaluate risks in the current climate, have completely cut back on their investments. Yet apart from that, I do not see any major changes. Companies that were attractive before the crisis will continue to successfully close new financing rounds. Strong companies are currently posting even higher multiples than before, while weaker ones are getting very little trading and financing.