An exoge­nous shock, and Covid-19 cer­tainly is a large one, cre­ates a high degree of unfore­seen uncer­tainty for com­pa­nies and investors alike. Invest­ments that are con­tin­u­ously marked to mar­ket show sharp and extreme losses, and investors with poten­tial liq­uid­ity are forced to think about the appear­ances of short-term per­for­mance. These investors often feel com­pelled to make deci­sions regard­ing their invest­ments that are dri­ven by fac­tors that only weeks or months prior played no role in their invest­ment think­ing and may not be related to long-term per­for­mance optimization.

Of course, ven­ture cap­i­tal and pri­vate equity investors must not lull them­selves into think­ing that because their invest­ments have not suf­fered vis­i­ble price declines that there has not been an equal, or greater, value impact on their port­fo­lios. Indeed there has been great value destruc­tion for nearly all com­pa­nies due to this exoge­nous event. Cer­tainly, the vast major­ity of early-stage ven­ture-backed com­pa­nies have less finan­cial cush­ion (on their own bal­ance sheets) to weather longer storms than most pub­licly-traded com­pa­nies. How­ever, it is pre­cisely because ven­ture investors are focused on invest­ments with at least a seven-year time hori­zon (and in many cases much longer), and gen­er­ally have com­mit­ted cap­i­tal to invest, that they are able to main­tain a strong focus on com­pany- and indus­try-spe­cific fac­tors and on cre­at­ing value over the long term.

This long-term invest­ment phi­los­o­phy per­mits a healthy level of calm­ness in the midst of storms, and enables ven­ture investors to make impor­tant and nec­es­sary adjust­ments while main­tain­ing a course designed to profit over years not months.

An extremely crit­i­cal ele­ment for investors to tra­verse crises and to reap the ben­e­fits of long-term invest­ing is hav­ing com­mit­ted fund­ing with­out the risk of lim­ited part­ners (fund investors) reneg­ing on their com­mit­ments. bm|t’s early stage funds (Thüringer Startup Fonds and Thüringer Wach­s­tums­beteili­gung Fonds) are com­prised of 80% fund­ing from the Euro­pean Union and 20% fund­ing from the Free State of Thürin­gen, and are fully com­mit­ted from these strong part­ners from day one of the funds´ existence.

bm|t’s funds do have con­di­tions requir­ing pri­vate co-invest­ment, which does reduce our abil­ity to act alone. How­ever, this con­di­tion has led to the estab­lish­ment of a strong net­work of like-minded pri­vate co-investors that bring addi­tional strength to sup­port our Investee-Part­ners in dif­fi­cult times.

The ben­e­fits of this extremely sta­ble cap­i­tal base and strong co-investor net­work have become starkly appar­ent in this time of cri­sis, as we have gen­er­ally been able to main­tain our funds’ phi­los­o­phy and activ­ity in these chal­leng­ing times. Star­tupdec­tor ranked bm|t’s early stage funds (Stiftung Thüringer Beteili­gungskap­i­tal) as the third most active startup investor in Ger­many for Q1 2020.*

We aim to con­tinue to be a reli­able and trans­par­ent investor for our Investee-Part­ners at all times, but are espe­cially pleased that we have been able to main­tain our role and invest­ment phi­los­o­phy in these dif­fi­cult times.

Wish­ing you health, strength and fore­sight in these try­ing times,
Your bm|t Team

* https://lnkd.in/diYU7eN