Fear and speculation of a recession (which some analysts say is already here) worries many would-be entrepreneurs and founders. Venture capitalists have already warned their portfolio companies that they may need to make their latest funding round last much longer than expected.
At the same time, it’s important to remember that some of the biggest global companies were start-ups during previous economic downturns (GE, Microsoft, Google, Netflix, Airbnb, etc.).
Arnott Capital – July Performance Update
Arnott Capital Commentary for the month of July ended July 31, 2022. The fund had a negative return of 0.96% for the month of July 2022. Net exposure averaged 1%, while the average gross was 154%. This brings our calendar year return to a positive 1.15% and since inception to 23.22% per annum, net of fees. Coverage Q2 2022 Read more
What can entrepreneurs learn from these companies? What are smart founders doing now to position themselves well in a recession? Sprinters’ health CEO and co-founder Max Cohen offers insight into what the recession could mean for healthcare companies in particular, including his advice on the current climate for start-ups and insights into the outlook for digital health.
Opinions on the current climate for entrepreneurs
- “There will always be plenty of money for good companies, and innovation won’t slow down,” (Cohen is still getting cold investing emails, though he estimates volume is down about 20% overall.)
- “The rise in valuations will be slowed down a bit more than it was perhaps six months ago, but you will still see top quality companies getting the oxygen they need to breathe.“
- “There is also something to be said for the coin to stand out during an economic downturn. For example, companies like Uber and Slack were created at or around the time of the 2008 recession.“
Perspective on digital health outlook
- It’s not great, but not so bad for Digital Health – Although there has been a wave of digital health layoffs this year, including Carbon Health and Ro, the full estimate of VC funding planned for the year is around $21 billion. dollars. That’s significantly lower than the all-time high from 2021, where digital health startups raised $29.1 billion in funding, according to Rock Health Data. But it remains solid: funding for 2022 is higher than the totals for 2020 and 2019.
- Cohen is optimistic about the prospects for Sprinter Health (and other home care providers) as the company helps providers and health care systems close staffing gaps and bring the last mile of home telehealth services at an affordable price. This bodes well for healthcare companies focused on home care.
Advice for Business Leaders and Entrepreneurs
- Keep an eye on the long-term vision
“From the beginning, we spoke to our investors not to build a business designed to capitalize on current conditions, but rather to last in 2024, 2029, 2036. Be deliberate. Take a close look at your PMF (product-market-fit). Health care in particular is not something you take a Silicon Valley approach to.”
- If you’re capitalizing on existing trends like telehealth, be sure to add clear value
Sprinter Health is designed to take advantage of the growing popularity of telehealth while making telehealth work better. “Telehealth, plus a provider like us, can capture data and let you [about] 80% of the value of an office visit. We help get 20% of a patient’s health data out of the home. It’s much more convenient for the person at home and saves money for whoever has to pay the bill.”
- Push for growth, but adjust the pace
Prior to the current economic climate, we were expecting 100% growth – in terms of headcount – by the end of 2022. We have revised that figure to around 60%. We’re still going to be considerably bigger than we were, but we’ve reduced the number of people we want to hire.”