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  • Writer's pictureTodd Bertsch

The Effects of Remote Working on VC Investments

The pandemic proved to be a typhoon for most of the Venture Capitalists and startups across the world. While some managed to gain whopping success overnight, others fell down into a dark abyss of an unpredictable situation that is still continuing to create chaos around the globe. The Covid-19 has slowed down even the high-growth unicorns but when we talk about the startups, some noticeable acceleration in the pattern can be noted.

Throughout the pandemic, most of the venture-capital backed startups remained unharmed. In fact, around 52% of the startups got a positive impact due to the situation, as stated in a working paper from researchers of various renowned universities. One important trend that has been noticed is that more companies are switching to remote working because of Covid-19. There is a renewed significance of remote working and it is helping many startups. In this post we are going to analyze the impact of remote working on Venture Capital Investments.

What are the investment trends?

The general rule which the VCs are adopting in the Covid days is that they all are following the whir. If there is a particular industry or sector that is seeing a hike in sales and is having new customers, Venture Capitalists will go there in packs. This is a fact that there has been a rise of interest in tools that ease remote working. This is the reason why more investors are taking interest in remote working; the trend was already on rise in 2019 but the process hastened because of Covid-19 later.

Forbes say that the SaaS companies will be the most successful ones and the true contributors to the ‘Work from Home’ economy. One such startup is WorkStorm. It keeps the remote working team connected and allow people to communicate securely. Companies like these that are facilitating remote working are showing potential growth as more VC investors are looking forward to support software startups like these. Since there is already a shortage of remote working tools, such software startups are proving to be a ray of light in this situation. The chart below explains the trend of various industries during the pandemic:

When it comes to cyber security, there are some inconsistencies that need to be addressed. The remote workers are scattered in various locations and there might be threats to the company’s sensitive data. For this reason, Venture Capitalists are also investing into cyber security companies. Following are the biggest challenges that are faced by the SaaS firms, the figure also shows the latest SaaS trends:

The VCs are not worried about too many remote working software entering the market and they are investing more in such startups. During 2020 there has been a rise in demand for the collaboration and video-conferencing tools and this is the reason the VC firms are planning to or already investing into companies that are providing platforms for remote working.

Also, according to a recent survey by ETR, a U.S based enterprise, the percentage of people working from home is expected to rise in 2021. As this number will increase, there will be an increase in demand of SaaS companies and thus VCs will also look forward to it.

VC investors are looking for flexibility

Venture Capitalists take into consideration some factors before making an investment, and that is the longevity of the firm. Though some might think that quick returns are more beneficial, but the wise ones are those who consider sustainability in their investment. There are so many startups that are coming forward to undertake the challenges of remote working and thus investors are being cautious in choosing startups. Investors want to consider those startups that show a good usability that spans beyond the pandemic period.

The above chart explains how the digital industry has seen a boom in IoT platforms and apps. There is an increase of VC funding for startups that are providing tools for remote working such as those that allow collaboration and workforce management.

To cut it short, remote working or ‘Work from Home’ is here to stay. The senior intelligence analyst at CB insights, Nicholas Pappageorge states that communication and collaborative startups may do better as compared to other startups. According to a survey by PWC USA, around 55% of the companies will encourage their employees to work from home even after the pandemic is over. Also, when the employees were asked this question, around 83% of them said they will prefer remote working. This way, many of the startups won’t be affected by changes in social distancing or the supply chain.

The above chart shows the productivity levels of the employers and the employees during the pandemic. From the figure it’s obvious that more percentage of the employers and employees performed at the same level or were more productive working from home.

What are investors interested in?

VC investors are looking for such platforms and apps that could provide a decentralized approach to manage the workforce and also promote employee encouragement. Companies like Work Storm provide a powerful remote working solution with numerous handy features like inclusive communication, effortless tech integration, and secure video conferencing capabilities.

Basically, investors want to invest in a cost-effective package that produces a high ROE (Return on Equity). Overall, investors are showing more interest in the healthcare industry and the SaaS tools. However, this doesn’t mean that there isn’t any scope for other industries; there are many investment companies that are operational and have been providing funds throughout the pandemic. Have a look at the following chart:

The Venture Capitalists had to change the pattern of their investments so that they could cover and provide for more of these startups. Since the remote working trend is here to stay, the buzz around the working tools and the SaaS firms is also expected to stay for longer even after the Covid-19 has ended. Therefore, you can expect to see more investments in this sector for the foreseeable future.

How investors can welcome the remote working trend?

New data and survey reports suggest that remote working trend will stay for more months and thus investors need to be more creative and adjust to the change. Following is an overview of some strategies that the investors can adapt to boost their performance:

The latest remote working data:

A survey from Gartner tells us that around 82% of employers are allowing their employees to work remotely for some time, and around 47% are allowing the workers to work from home on a full-time basis. Business leaders aren’t concerned about remote working, though some of them consider it as a negative factor for productivity, but most of them are satisfied with Work from Home.

The Vice President of advisory in the Gartner HR Practice, Elisabeth Joyce, states that the pandemic has brought a big experiment in the remote working phenomena. She further stated that the issue at hand is not about managing the remote work force, but to deal with a more hybrid and complex remote workforce.

Since the time is completely changing and moving towards a new trend, the investors should also find out unique methods and strategies to capture the market.

Bottom Line: Marketing tips for investors

Since lifestyle and working patterns are changing due to the pandemic, it is time for the investors to think differently and consider the remote working trend. The Covid-19 must be tough for some sectors but it has boosted other businesses too, especially the ones that allow remote working and digital transformation.

This is the main reason why Venture Capitalists are also changing their investment patterns. Remote investing can also be the new normal as big tech companies like Square, Google, Facebook, and Twitter are keeping their workers home for an indefinite period. The drop down of the physical offices can make the working life totally different from what it was. At the same time, remote working can spur employees and firms to think out of the box regarding their relationship with the work and the demand of the current time.

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