Investing During a Pandemic: Sawari Ventures

In this article series we interview different investors to understand the investment strategies they have adopted in light of COVID-19.
Investing During a Pandemic: Sawari Ventures

With all the uncertainty around the world, we interviewed different investors in the MENA region to understand how they have adjusted their investment strategies in light of coronavirus. We asked them about best practices for entrepreneurs, promising industries, and how they think the startup ecosystem should come together to get through the crisis.

In our first article in the series we spoke with Tamer Azer, Principal at Sawari Ventures to understand how the $40 million VC fund has reacted to the situation and adjusted its strategy.

Are you still investing?

Yes. Absolutely. In new companies and existing portfolio companies.

How have you adjusted your investment strategy?

Adjusting investment strategy is a fluid thing that is a function of opportunity cost and the performance of current portfolio companies during the crisis. If your portfolio is handling the crisis well then you will have a similar amount of funding available to invest in new companies and your opportunity cost will likely remain the same or decline as there will be a smaller number of companies to choose from during and after the crises.

However, If your portfolio needs help then at the end of the crisis you will have less money to invest in new companies which means your opportunity cost is likely to increase but then if there are fewer companies to choose from you might end up with your opportunity cost unchanged. What I’m trying to say is that it’s hard to decide right now and you have to slow down a bit, not too much, and see which way the cookie crumbles.

What are promising industries for you? 

There are two ways to look at this and it mainly depends on the “vintage” of your fund. If you are just getting started and have a longer time horizon then you might want to think about something like investing in travel – you can probably find some very interesting companies that are undervaluing themselves because of the current climate, but if you fund them early and quickly, then they can do a land grab and acquire significant market share while waiting for the recovery in the travel business as many other companies in travel won’t have the cash for this. (Side note: On April 6, Airbnb raised $1 billion in a new round of funding led by Silver Lake and Sixth Street Partners. However, the company’s valuation has fallen to about $26 billion from $31 billion). 

The other way to look at this would be to think about edtech, healthtech, fintech, labour mobility or gig economy type companies that are currently benefiting from the current climate and will stand to grow as our behaviour as human beings is like to shift considerably after the crisis ends on account of all these new habits that we’ve all had to learn and old habits that we have all had to unlearn.

How have you supported your portfolio companies?

We’ve been talking to our portfolio companies regularly about their business, cash flow needs, pivots if necessary, employee and customer relations. These are regular in-depth discussions about the business. We are trying to stay involved to be able to help as and when it is needed. We’ve also been working very closely with portfolio companies to help those that need funding secure that funding.  We are standing behind our portfolio companies as they go to the market to raise money during these times. We believe in our companies and we show it. 

What are immediate changes startups can take to mitigate the situation?

There are only two things one can do in times like these. You can either optimize below the line which means reduce your operating expenses. If you do that, cut deep and cut fast. The other thing you can do is grow your topline in another way. Elves for example has partnered with Tabeeby to facilitate providing telehealth services. If an individual is in need of telehealth services, Elves helps them set up a virtual check-up with a doctor  within 30 minutes from going through the WHO symptom checklist.

What actions do you hope to see by other ecosystem players to provide support during the crisis?

I wish we all had the ability to pool together 1 or 2 million dollars and make 100K investments in 10 or 20 companies so we can increase the average survival rate of companies in our ecosystem. These would be companies that were doing exceedingly well who have been hit hard by the crisis. Like an industry wide relief fund of sorts. It would be the ultimate form of solidarity and a way for us all to work together and make sure as many of us as possible make it to the other side. Sadly I doubt this is possible for institutional investors.

If you see something out of place or would like to contribute to this story, check out our Ethics and Policy section.

If you see something out of place or would like to contribute to this story, check out our Ethics and Policy section.