Markets may recover from pandemic soon, says CapitalG investor

Vaccine announcements, possible removal of U.S. travel ban and other factors will contribute to economic recovery, senior investors say in Calcalist and CTech’s Mind the Tech virtual conference

CTech 17:0517.11.20

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During Calcalist and CTech’s Mind The Tech New York 2020 Conference, Derek Zanutto, an investor and vice president of CapitalG, a Bay Area firm, and Yevgeny Dibrov, co-founder & CEO at Armis Security spoke to Calcalist about their predictions for the market and how a Joe Biden Administration could affect tax increases and immigration.

When asked whether he thinks the new Pfizer and Moderna coronavirus (Covid-19) vaccines will affect valuations in the private tech sector, Zanutto noted that the market saw higher valuations, especially with SaaS, or Software as a Service companies.

“I think that the biggest impact of the vaccine announcement was that it gave investors increasing confidence around the shape of the economic recovery that is likely to occur. As a result of that you'll continue to see those valuations and multiples expand, not just in the public markets, but also in the private markets. It’s being driven by three things. One being the record low interest rates, the second being a record amount of ‘dry powder’ in private markets, and then third is a shift among VCs and growth investors increasingly toward TM Based (Object-Oriented) investing that really puts a primary focus on how big and easy adjustable a market is, and uses less less scrutiny around business fundamentals. There’s a belief that if you invest in the right market, it’s big enough, and you’re making a ton of money it’s irrespective of current business momentum.”

When asked what changes or increases in taxation will occur as a result of the Biden Administration, he said that one could expect to see increases on individuals and corporations, but if the Republican Party takes control of the Senate—which remains an open question as runoff elections are being held in Georgia—the freedom to do so will be muted. However, he does believe that President Donald Trump’s travel ban could possibly be revoked, and that could curb restrictions on H1-B visas for foreign workers.

Belonging to that category, Dibrov noted that while in pre-Covid-19 times it had affected him, now it wasn’t an issue.

“In the Covid-19 era it’s a bit less important, because you can be on Zoom sessions anywhere. Face-to-face with customers especially in the early stages is important,” he said.

He recommended that during the first two or three years of a company, founders should be in the U.S. or where they can directly interact with their customer base and investors.

Both also voiced concern about the decrease in seed, early stage, and later stage funding, Dibrov recommended being in tune with a company’s customer base to avoid mistakes, while Zanutto suggested that startups create a comprehensive and convincing narrative for investors.